Ways to Consolidate Your Credit Card Debt
You’ve probably heard people talk about credit card debt consolidation, but may not know exactly what this refers to. Looking around the Internet, there are plenty of people who want to tell you what it is, according to them, but usually they’re trying to sell you a program about it rather than explain what it is so you’ll know what you could be getting into.
Sometimes credit card debt consolidation gets in the news and you’ll see it in the newspaper or hear about it on television, but these usually gloss it over as they move on to other subjects. So let’s look at what, exactly, credit card debt consolidation is and how it can help you.
First of all, credit card debt consolidation is not like a normal bank or other lender’s loan to consolidate debts. That is for extreme measures when debt is getting too hot to handle, but hasn’t fallen all the way into the fire of bankruptcy yet. You might even have done your own credit card debt consolidation and not even realize it.
Simply put, credit card debt consolidation is when you take the debt on one, two, or more credit cards and "consolidate" (or transfer) them to one or two cards for a better interest rate or to cut interest altogether for a specified amount of time. So when you get those offers from credit card companies to "transfer" debt at no interest for a year and you take advantage of that, transferring high-interest card balances over, you are doing a credit card debt consolidation.
This unique way of managing debt is a fairly new phenomenon as far as credit goes, but can be a great boon to consumers who are tired of paying high interest rates and want to cancel an account without having to save the money to pay it completely off. It’s also a popular way to move all your credit to one or two accounts so you can more easily track it or pay it off at a lower rate.
Credit card companies offer these accounts to consumers for several reasons. Their first and primary reason is to get your business: if you get their credit card, chances are you’ll use it. Statistically, even if they offer you a whole year interest-free on your balance transfers, you’re not likely to pay off that balance in that time, so they’re statistically likely to collect interest anyway. Watch for this, as often the new interest rate is at a fairly high percentage or is "variable," which often amounts to the same thing.
For you, the consumer, choosing your credit card supplier and deals wisely is very important. If you do choose a good credit card debt consolidation plan, make sure that the card you’ll be moving the balances to is from a reputable bank, has a deal that is right for you, and won’t become a nightmare down the road when interest rates start to skyrocket because they don’t offer a guaranteed rate right from the get-go. Often, choosing the card with the best introductory rates or a lower guaranteed rate over the one that gives you a year of interest-free balance transfers is better because you may not have that balance paid off by the end of that year.
So definitely do your homework and consider the options, but for someone with fair or good credit, this option is a great one to exercise your financial muscle and keep your credit manageable. So don’t automatically throw away those zero balance transfer offers from reputable credit card companies, they might be what you’re looking for!
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