WARNING: Read This Before Consolidating Your Credit Cards!


The Summer Finance Blogoff 2012

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Entry From Whitney Sparks ~ Enter to win £50/$50!

WARNING: Read This Before Consolidating Your Credit Cards!

We are often asked this question when we teach Financial Peace University.  I thought that I would share our experience with debt consolidation and then let you come to your own conclusion.  Keep reading because what I have to say might just change your mind before you decide to consolidate.


means that you are taking out one loan to pay off all the others that you have accumulated.  Usually people decide to consolidate their debt to achieve a lower interest rate, secure a fixed rate, or be able to service only one loan.


Our story is like many others. At the time I didn’t realize that. I thought that Greg and I were the only people on the planet struggling to pay our credit cards.

I was still in college and working part-time at a local library. Greg had a full-time job but was unemployed when we were first married. So, we were just barely getting on our feet.

We have never missed a credit card payment, but that’s mostly because we chose not to eat. When you’re paying $450+/month for credit cards on a full-time/part-time income then it’s hard to keep your head afloat.

Back in the day when we were newly married we were just trying to survive. So, we opted for debt consolidation to help us at least feel like we were accomplishing something in our financial life.

I can’t tell you what made us decide to consolidate our debt other than pure desperation.

When we received a phone call where they were telling us they could help get us out of debt in 5 years that sounded really good, at the time.  It also sounded nice to hear that we would only receive one bill and not have to pay 2 separate credit card bills.

This is why debt consolidation looked so good. Let me show you how much we paid for us to combine those balances and have a “lower interest rate”.

CREDIT CARD #1 = $16, 242.64

CREDIT CARD #2 = $9, 629.09

SUBTOTAL = $25,871.73


MULTIPLY $38 by 63 months = $2, 394.00

(we were on a 5-year-plan, but it took us 3 extra months to pay it off)

GRAND TOTAL = $28, 265.73


I would not have thrown our hard-earned money down the drain. See, this only sounds like a better deal. What they failed to tell us is that the lower interest rate comes from extending the loan to X amount of years.

Also, consolidating our debts did not help us change our habits in any way. We still accrued a lot more debt ($53,000 to be exact) over the next couple of years. So, the money was not well invested because we didn’t learn our lesson.

I just wish that we would have done more research. We thought this 5-year-plan sounded amazing. My husband had those credit cards since college, but we wound up paying on them until 2007.

I wish that I could have met someone to give us a swift kick in the behind and motivate us to get out of that debt before buying a house and having children.

If we had hired a financial coach to show us how to budget, I know we could have easily paid off this debt in 2-3 years (if not sooner). We actually would’ve saved money by hiring a coach, paying the one-time fee, instead of paying out a monthly service charge for debt consolidation.

Who do you think got the better end of this deal?

Have you entered into a debt consolidation program?  If so, please feel free to share your story.

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