Credit Card Debt Consolidation is the process or strategy to consolidate debt from multiple credit cards into a lesser number of cards, ideally one or two. Credit Card Debt Consolidation can also be referred to as Balance Transfer, where you transfer the balance owing on one or a number of cards to another. Generally the balance transfer or debt consolidation is done from credit cards with high annual percentage rates to credit cards that offer a lower rate of annual interest. Credit Card Debt Consolidation can also be achieved with a low interest bank loan, using the amount borrowed to pay the high rate credit card balances and then paying back the bank loan at a lower annual interest rate.
As you might have noticed many credit card suppliers and banks keep coming out with attractive offers for Credit Card Debt Consolidation or Balance Transfers. Debt Consolidation is a serious exercise and care must be taken to avoid getting yourself into deeper financial trouble. When applying for a debt consolidation card or loan you should properly investigate the offers from the various banks and card suppliers.
Check the time period for which the lower percentage rate is being offered and what the percentage rate will increase to after the initial low interest period. Generally a very low interest rate is offered for the first six to twelve months only. This is fine if you are confident that you can pay off a substantial amount of the balance owing in this period, however if there is any doubt as to the time frame needed to reduce the balance owing considerably you would be better off with a card or loan that offers a long-term low annual interest rate. Although the initial rate may not be as low as some offers, as long as the long term interest rate is lower than what you are paying on your original cards/s your debt consolidation will be successful.
Another important aspect to consider is the amount of charges or fees that come with your debt consolidation card or loan. If these charges are above what you are already paying it will make your debt consolidation efforts fruitless. Another good idea is to approach your current credit card supplier and see if they can offer you a lower annual percentage rate to help you with clearing your debt. With the amount of suppliers fighting for your business you may be surprised at what they will do to keep you with them.
It is very important with Credit Card Debt Consolidation that you exercise some control over your credit card spending and maintain regular payments or you may find yourself feeling like you are ‘spinning your wheels’ and getting nowhere with it.