Can I Keep a Credit Card With Consolidated Credit?

Credit card debt consolidation is an option for some consumers who want to simplify the number of bills they pay or lower their monthly bill payments. Consolidating your credit cards doesn't affect the terms of your current credit card agreement, and you don't have to cancel or change the credit cards if you consolidate.

Consolidation

When you consolidate credit cards, you get a new loan to pay off the balances on your cards, and then pay the new loan back to repay the debt. After you consolidate the card balances, your cards then have a zero balance meaning you don't have to pay those bills each month. You can still use the cards you paid off, though doing so will mean you have to pay more bills.

Cancelling Cards

When you consolidate your credit cards, the cards you pay off return to a zero balance. You can cancel those credit cards at your convenience because you no longer owe the creditor money. However, this is only an option and you are under no obligation to do so. If you used the debt consolidation to limit your access to credit cards so you don't spend too much, you may want to cancel your accounts.

Effects

The longer you keep a credit card the better it is for your credit score. About 15 percent of your credit score is based on the length of your lines of credit, according to FICO. If you had your credit card for several years, this shows that you are a reliable borrower and improves your score. Canceling the card can lower your score. Even though the account remains on your report, it is listed as closed and is not factored into the average length of your open credit lines.

Warning

When you consolidate your credit card bills, you do nothing to eliminate or lower the total amount of debt you owe. Even if your monthly payments are lower, you still owe the money. People who consolidate their credit cards and then use the lower monthly payments to incur more debt can quickly run into financial disaster. Consolidating debts is useful in some situations, but it shouldn't be used simply as an excuse to go out and buy more.