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Does Debt Consolidation Close Credit Cards When You Enroll?

Epic Loans Editorial Team

Does Debt Consolidation Close Credit Cards When You Enroll

Credit card debt is a familiar and perpetual concern for many Americans, considering recent studies that indicate that an average adult holds about four credit cards. With the current economic challenges, many Americans find it increasingly difficult to settle the debt accumulated on these credit cards. No matter how disciplined you are about repayment, the prospect of unforeseen expenses, financial and medical emergencies or loss of income may pose challenges in repaying this debt.

This is where debt consolidation can help. It’s a process that helps pay off all your existing credit card balances, including accrued interest, faster and with minimum additional fees. It combines all the credit card debts into a single loan and offers a manageable monthly payment structure – usually with a lower interest rate. But before enrolling for debt consolidation, you may have questions regarding the credit card status or the impact on credit scores. One of the main concerns is whether debt consolidation closes your credit card accounts?

Does Debt Consolidation Close Credit Cards?

So, what happens to your credit cards once their balances are paid off and consolidated debt is transferred into a new loan? 

Usually, most debt consolidation methods do not require you to close your credit cards, allowing you to keep them open for your use. However, it’s advisable to exercise caution when using them before your consolidated debt becomes manageable, as any new balances will only accumulate additional debt.

It’s important to note that certain debt consolidation options may lead to the closure of your credit cards. The main options are outlined below.

  • In a Debt Management Plan (DMP), you enroll all your credit cards and other debts with a credit counseling agency, which will set up a program for a specified period and negotiate with the lenders for reduced monthly payments because of lower interest. Once negotiations are successful, you’ll make monthly payments, and the agency will distribute the funds to your creditors. However, your enrolled accounts, including credit cards, will likely be closed, though exceptions may be made for keeping one account open for emergency use.
  • Debt settlement is a process either undertaken by a debt settlement agency or by individuals. It involves negotiations for a reduction in your total debt. This lowered debt is subsequently repaid over a set timeframe or as a final lump-sum payment. If you opt for agency assistance, you’ll be advised to stop your monthly payments to creditors and instead contribute a specified amount into a secured savings account. As your savings account accumulates funds, the agency will engage with your creditors in negotiations to lower debt amounts. Once a settlement is reached, the agency utilizes the accumulated funds in the account to pay off your creditors.
  • Filing for bankruptcy closes your credit card accounts – whether they are current or paid off.

Can I use my credit card after debt consolidation?

Heavy use of the credit card immediately after consolidation might not be prudent, even if it is not closed. Getting a new credit card will depend on how your credit score has changed during the consolidation process. If you do use the credit card again or get a new card, it’s important to use it cautiously and reserve it for emergencies.

Read More: Does Credit Card Consolidation Hurt your Credit Score

Can I use my credit card after debt consolidation

Benefits of Keeping Your Credit Card Accounts Active

Keeping your credit cards active after consolidating your debts can offer several benefits, especially in terms of your credit scores, as listed below.

  • The average age of your credit accounts, which reflects how long you’ve held your credit cards, impacts your credit score calculations. So credit card accounts, even with a zero balance, continue to factor into the average age of your credit history as long as they remain open.
  • Once the debt consolidation loan clears your credit card debt, your credit scores will improve as your credit utilization ratio will significantly improve.
  • Payment history also plays a substantial role in your credit score. Since all your debts are consolidated into one loan, your credit scores will show improvement, provided you consistently make on-time payments.

Do I Have to Close my Credit Cards After Debt Consolidation?

The answer is ‘No’. However, it largely depends on your specific circumstances, like having a good credit score and a relatively small debt will help you keep the card. You can opt for balance transfers or debt consolidation loans where you are not required to close all credit card accounts. A balance transfer credit card typically comes with no such stipulations. With a debt consolidation loan, too, account closures are not mandatory.

Read More: How does Credit Card Consolidation Work

Strategies to Manage Finances Post-Consolidation of Credit Card Debt

Now that you are exploring debt consolidation options, it’s equally important to have a plan for effective financial management after the consolidation process. As mentioned earlier, remember that even though your credit cards are active, it’s advisable to refrain from immediate use as it could upset the finances further. Any new credit card debt incurred cannot be included in your existing consolidation plan, and you may have to repay it separately.

Create an Emergency Fund

Building an emergency fund is a good way to ensure financial stability. This fund provides safety for unexpected expenses or emergencies. It’s a good idea to consistently save a small portion of your income for contingencies.

Save and Invest

Continue to save money as much as possible and consider investing these savings as they can provide long-term financial security.

Monitor Your Credit Report

It is good to monitor your credit scores to check for any changes or detect any discrepancies. With an improved credit report, you will get better financial opportunities and favorable interest rates.

Pay Bills on Time

The monthly payments towards your debt consolidation should be made on time to maintain a positive credit history. Late payments may lead to penalties, increase in interest rates and may affect your credit scores.


There are many queries to be addressed before going through debt consolidation, the main one being whether credit card debt consolidation loan closes your credit cards? While the short answer to this is ‘No’, it largely depends on the debt consolidation method chosen and the policies of the creditors. In most cases, credit card accounts remain active after consolidation and the decision to keep or close the credit cards should depend on your financial goals and circumstances. Now that the questions related to the impact of debt consolidation on your credit card status and credit scores are addressed, you can decide if it’s in your best interest to pursue credit card debt consolidation. Epic Loans will assist you in finding a solution best suited to your financial circumstances. We encourage you to take the first step towards financial well-being by scheduling a free consultation with one of our Debt Consolidation Specialists today.

Frequently Asked Questions

Does debt consolidation close your credit cards?

The short answer is no. While some companies could require the closure of your credit cards while consolidating the debt, it is not mandatory across the board.

What is the difference between secured and unsecured debt?

A secured debt is backed by collateral, usually an asset, which can be seized to recover in case of defaults by the borrower. An unsecured debt has no such backing and is based solely on the creditworthiness and the repayment capability of the borrower.

Do I have to close my credit cards after debt consolidation?

No, in most cases, the credit card account can remain open, even with zero debt. But this depends on the method of debt consolidation program chosen and the creditor’s policies.