Sometimes when we feel the pinch, we look for an answer anywhere and with credit cards, credit card debt consolidation looks like a promising prospect. The one thing you must remember though is that the whole point of credit card consolidation is to get your higher interest credit card debt to a lower interest rate. If the majority of your credit card debt does not drop to a lower interest rate, you have nothing to gain from credit card debt consolidation. Two cards at 18% will accumulate the same amount of interest as one consolidated payment at 18%. See what Im talking about? Another pinch factor reason for credit card debt consolidation is if youre really need to free up some money in the monthly budget. It works this way. Lets say you have the same above mentioned high percentage interest rated credits cards as above. One has a minimum monthly payment that is less than the other. Seeing this you go through the process to consolidate credit card debt to free up some money. YOU JUST SHOT YOURSELF IN THE FOOT. The sooner you pay off your credit card debt, the sooner you stop getting hooked with accumulated interest! Why would you opt for a lower monthly payment and let that consolidated credit card debt sit there for longer? Now if your debt is making you money somewhere else at a higher rate of return than your credit card consolidation is growing, then by all means keep rocking. The Pro Reasons Behind Credit Card Consolidation: Interest Rates Are High - Getting a high interest rate credit card melted into a lower interest rate consolidation. Annual Credit Card Fees If you have several credit cards and the annual fees are adding up and you dont end up paying more interest by consolidation your credit cards, it might be an option. Cant Pay Minimum Monthly Balances If everything is getting away from you and you are risking ruining your credit because you cannot make your minimum monthly payments on your credit cards then it may be time to consolidate credit card debt. What happens is since everything is in one payment, you don not have several angry people to deal with, they have all been paid off. Now you just make the one payment to pay down all your credit card debt and everyone is happy. A word of warning. Sometimes credit card companies will hook you by saying that they will actually pay off some of your debt if you switch over to them. Chances are there will be a pretty hefty interest rate waiting for you if you do not meet some unmanageable criteria in the next couple of months. Read the agreement carefully. If you are in a good financial situation and just want to be smarter then go to the bank. Ask your banker if they will extend your line of credit. Chances are the interest rate on your line of credit will be less than anything you can find for credit card debt consolidation. From then on, use your line of credit to make emergency purchases. |
