Ronnica Rothe is a graduate with honors from the University of Oklahoma and a current student at Southeastern Baptist Theological Seminary. She works with Personal Financial Network to help individuals get out of debt and reach their financial goals.
Consolidating your credit cards is a great way to eliminate credit card debt and free up some extra cash for normal expenses. When considering consolidating credit card debt, you want to make sure that you are choosing the right options to improve your financial situation.
One type of credit card debt consolidation that most people are familiar with is balance transfers. Most credit card companies make it easy to transfer the balance of one or more credit cards to a new or existing credit card. This can be beneficial if the card you are transferring your balances to has a noticeably lower interest rate. This type of credit card consolidation is convenient and save you money by requiring less to be paid in interest.
Balance transfer might sound like the right option for you, but there are con’s to it to consider as well. Many credit card companies will charge you fees for transferring balances. Also, the low interest rate you might enjoy initially is probably an introductory offer that will expire in six months or a year. Then you will end up with a large balance at large interest rate again. Transferring your balances regularly will also appear as a negative item on your credit report, lowering your credit score. A final problem with balance transfers is that the credit card company will not be willing to negotiate with you to lower your interest rate if it does shoot up since the money on the account was originally with other creditors.
Another popular form of debt consolidating is through applying for a personal loans. In order for this to be helpful, you will need to qualify for a low interest rate, which requires good credit. Having high credit card balances will decrease your credit score, disabling you from getting a good rate on a personal or debt consolidation loan. It is also not a good idea to pay off one form of debt with another.
If balance transfers and debt consolidation loans don’t work in most cases, you will need to find another way to consolidate debt. There is a type of debt consolidation that is not a loan and can lower your interest rates. This is called a debt management plan. When you enroll with this plan, a credit counselor will work with your creditors to help you see lower interest rates and maybe even lower monthly payments. Because you will be receiving a break on interest rates, more of your monthly payments will be going directly to paying down the debt you owe. By paying one consolidated payment to the debt management company, you will be able to pay on each of your credit card bills at once.
Consolidating credit card debt can be a great way to eliminate it. Just make sure you are making the right decisions for you and your family.
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