When You Consolidate Credit Card Debt Watch Out For Hidden Fees

When you consolidate credit card debt watch out for hidden fees that can hurt the process. High interest rates can be a big drain on your finances. If you are stuck with loans or credit cards at high rates, it can seem that every cent goes to pay the interest and that the principal balance never seems to get smaller. That means you may think it might be a smart move to consolidate credit card debt and reduce your interest rates to a figure that is easier to work with. At first glance, it may seem like a good idea to transfer a credit card with a percentage rate of 18 percent to another card carrying a lower rate, such as 13 percent. But before you make the balance transfer, be sure you investigate the fine print of your contract with the lower-rate card, as you may find that there are hidden fees that could come back to hit you hard when you actually do consolidate credit card debt.

What should you look out for?

Some credit card companies charge a balance transfer fee that you will have to pay when moving the balance from your higher-rate card to the new credit card. In many cases this fee is a flat rate, one time charge of $35 or $45. But, some consumers report that they've been shocked to learn that the balance transfer fee is actually a percentage of the amount transferred, some as high as four or five percent. On a $2,000 balance transfer, a five percent transfer fee will set you back $100. And don't forget when you consolidate credit card debt, these balance transfer fees are added to the new outstanding balance on the lower-rate card. That means if you don't make a payment that covers the transfer fee immediately, you'll be paying interest on top of the fee itself.

In addition, check other hidden fees when you consolidate credit card debt onto a lower-rate card. For instance, if you prefer to make your payments via telephone, some card companies charge a telephone payment fee. You may be shocked to find that your old card didn't require a phone payment fee, while your new card does require a fee, sometimes as high as $10.00 per transaction. That means you'll have to adjust your preferred payment method to avoid getting hit by such a charge. Your credit card company should inform you of any convenience or payment fees that will be required before you actually complete the payment. If they don't, then make sure you ask.

While we often refer to these fees as hidden, that's only because these fees may not be on the mind of the consumer when making a decision to consolidate credit card debt. You should know that the credit card companies are required to disclose fees to you before you avail yourself of their offers, so carefully consider the details and fine print before you act.