What is Credit Card Consolidation
It cannot be denied that credit cards
are the most flexible and convenient payment vehicles available nowadays. But it is equally true that you can easily find yourself buried in debt, especially if you use your credit card to buy things you cannot afford, paying off just the minimum monthly installment. This happens because some credit cards have a minimum monthly installment of just two percent of the used credit while the annual interest rate on them is as high as over nineteen percent. So, by paying off just the minimum amount each month, you are basically paying only the interest on your credit card debt
, at best.
How much interest do you currently pay on your cards? Answering this question is the first step towards successful credit card consolidation
. Think about this: instead of having, say, four different credit cards with nineteen percent annual interest each, you can consolidate them to just one credit card with a very low annual interest rate. Many credit card issuers offer interest free
introductory periods as a way to encourage new clients to transfer a balance. Some offer a zero percent interest rate for over a year. Thus, you can save a significant amount of money on interest by consolidating your credit card debt and transferring your balance. For instance, if you transferred a balance of $1,800 from a credit card with an annual percentage rate of over seventeen percent to one offering zero percent interest on balance transfers
for a period of sixteen months, you could save over $300 during the course of the interest free period. Furthermore, some creditors are willing to eliminate or cut down over-limit charges and late-payment fees.
If you are looking for a solution to your credit card debt
worries, perhaps it will be a good idea to seek the assistance of some debt management company
or sign up for a consolidation program that will help you pay off your debts within a period of four or six years, depending on how much debt you have accumulated.
Credit card consolidation offers several advantages
: low interest rates, single payment
of multiple bills
, and dealing with one creditor. Besides dealing with a credit card consolidation
company, borrowers may try and sort out their multiple debts on their own. All you have to do is to go through the following steps. First, come up with a list of all debts and consider the order of priority. Write down your monthly income
: wages, state benefits, child tax benefit, etc. Then do the math and see how much you will be able to pay on all of your debts per month. Contact your creditors and try to negotiate lower interest rates. Then transfer balances on all cards to one that has zero or low interest rate
. You have to go through the terms
of the zero interest rate card and check if it has reasonable introductory period. If it is sufficiently long, you will be able to pay off the outstanding balance at a 0 percent rate.
In addition to debt consolidation program, there several other debt management options available.
For instance, you can have your outstanding balance reduced by as much as sixty percent with the assistance of a debt settlement company
or use the services of a credit counseling agency
to get a tailored debt repayment plan that suits your financial abilities.
Consolidation loans can give you a breath of fresh air in your debt-ridden everyday life. A consolidation loan is a kind of personal loan that helps you consolidate your debt into a single monthly payment. However, debt consolidation loans are hardly available for bad creditors. This means that you may not be eligible for a consolidation loan if you have been put on the creditors’ black list.
Alternatively, you may work out a self repayment plan in just three simple steps. First, you should assess your financial situation, then you should figure out how much money you could afford spending each month after paying the installments on all of your credit cards, and third – stick to your monthly budget. Needless to say, you should try not to use credit cards while you are on a self-repayment plan.