How to Consolidate Credit Card Debt

To consolidate credit card debt, you combine multiple card balances into one new payment, ideally at a lower interest rate, so it is easier (and cheaper) to pay off.

Common ways in Canada are a debt consolidation loan or line of credit, a balance transfer credit card, or a debt management plan through a credit counsellor.

Make It Easier to Stop Adding New Debt With KOHO Essential

With KOHO Essential:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

• Use a prepaid Mastercard® for groceries, bills, subscriptions, and travel.

• Grow your savings with a 2% interest savings rate on your entire balance.

• Earn 1% cash back on groceries, eating & drinking, and transportation.

• You can subscribe to Credit Building for $10/month, it's an affordable way to build your credit history.

• Enjoy unlimited transactions and free e-transfers (never worry about fees when sending money to someone again).

This helps because you can spend day to day using your own money while you focus on paying down debt.

Step 1: List Your Cards (5 minutes)

Write down for each card:

• Balance

• Interest rate

• Minimum payment

This tells you what is costing you the most each month.

Step 2: Pick a Consolidation Option

Option A: Consolidation Loan or Line of Credit

You borrow one amount, pay off your cards, then make one monthly payment to the new loan or line of credit.

The goal is a lower rate than your credit cards.

Option B: Balance Transfer Credit Card

You move your balances onto one card with a low promo rate.

Watch for:

• A one time balance transfer fee, often around 1%–3% (and sometimes more)

• What the interest rate becomes after the promo ends

Option C: Debt Management Plan Through a Credit Counsellor

A credit counsellor can set up a plan where you make one monthly payment, and they work with creditors to possibly reduce or remove interest.

You usually repay 100% of what you owe, and there may be fees, so ask for the full cost upfront.

Step 3: Compare the Total Cost (Not Just the Monthly Payment)

Before you apply or sign anything, compare:

• Interest rate

• Fees (transfer fee, setup fee, monthly admin fee)

• How long it will take to become debt-free

Debt consolidation only helps if it actually lowers your total cost or makes the plan realistic to finish.

Step 4: Consolidate, Then “Freeze” the Old Cards

After you consolidate:

• Set up automatic payments for the new loan or plan

• Try not to keep using the old credit cards (otherwise the debt comes right back)

If you need a spending card while you pay down debt, KOHO Essential can help you stay in control since you are not borrowing.

Step 5: Know What Happens to Your Credit

Applying for a new loan or balance transfer card usually creates a hard inquiry, which can cause a small temporary drop

A debt management plan is different and can affect your credit report too, so ask the counsellor what it means before you enroll.