Everything You Need To Know About Credit Card Debt Consolidation


If you are the kind who has several credit cards, you may consider the credit card debt consolidation. When you hold different credit cards, it means that you will be paying several bills every month. Each of these bills will have a high rate of interest. In order to minimize your debt burden and pay the debts faster, many consumers choose the debt management programs. However, before you can make such a decision, there are several things that you need to know.

Is credit card debt consolidation right for you?

There are a few factors that you need to consider before you can answer this question. These include:

  • The amount of debt that you owe. Get your credit card statements and determine the amount of debt that is owed to creditors
  • What amount are you able to put realistically towards paying the credit card each month. Remember that your goal is to pay off that debt fast.
  • For what period is the introductory low-APR window? If you can manage to get a longer APR period, you will get more time for paying of the debt prior to the rates getting back to the usual APR that is usually higher

After Answering these questions, determine the amount that you are able to save an interest of 0% during the APR window in comparison to your current rates. You should then determine the amount you are willing to pay at the standard purchase rate on the new credit card over the period of time of the balance. Compare the numbers with what you would pay on your current rate of interest.

Your credit can impact the balance transfer

After consolidation the credit cards and leveraging on the lower balance transfer, you will have a good opportunity of increasing your credit score. In order to achieve this, there are a few pointers that you need to follow. Try as much as possible to maintain the credit balance at a figure that is generally low. After consolidating the cards, your credit utilization ratios will be lower. However, the overall ratio should be same.  With the lower rate that you will get during the introductory period, you will have much more to pay for towards every month’s balance. This will help you to minimize your credit utilization fast.

Find out what is affected by APR and what isn’t

With a 0% APR introductory, this may only apply to the balance transfers. This means that new purchases may start to be charged at the standard APR which is usually higher. The agreement of the cardholder with the lender will shows the APR and if there is an intro rate. You may want to create a budget and ensure that you have stuck with it. This ensures you will get more from the credit card consolidation and the paying off the balance in a faster.

APR is not free

Even though an APR of zero is a good way of paying off the credit card debt in a faster way and saving on your interest rate, this is usually not free as per what most of the consumers think. The balance transfer fees that are charged can range from 2% to 5% of the balance transferred. However, even though there are costs that are upfront, there are great savings to be made. However, this should be a major consideration before you can determine whether credit card consolidation is the right thing.

Some credit counselors don’t have your interest in mind

If you want outside help to tackle debt make sure that you evaluate credit counselors as not all of them have your interest in mind.

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