How To Consolidate Credit Card Debt
If you carry a balance on several credit cards, it can be challenging to get them all paid on time every month. If finances are tight, it may be time to cut down on credit card spending and consolidate credit card debt into one easier payment. There are pros and cons to consolidating your credit cards and each person’s financial situation is different so you should do. What is best for you?
If consolidation is the answer, there are some things to keep in mind. The most important is that you consolidate credit card debt onto the card with the lowest interest. You might even want to shop around for a new card if you have a good credit score. Many times when you open a new account, you are given an introductory low interest rate and the ability to consolidate your other credit cards during the application process.
The goal of consolidation is to lower your monthly payments so your budget is not so tight. However, this should be thought of as an emergency measure, and once you are back on your feet financially. You should make paying off your card, a top priority or you may be paying unnecessary interest for years. Before you take the step, you should also give some thought as to how it will affect your credit score. Maxed out cards hurt your score but in some cases too many available credit might not look good either.
Speaking of available credit, the last thing you want to do is start running up balances again on your paid off cards because it won’t take long until you are back to juggle multiple payments and straining your budget. Credit cards can be a real life saver when they are used wisely, but they can also cause you a lot of grief when it is difficult to pay them back.
Once you have a financial recovery plan worked out and have selected the best card to consolidate credit card debt onto, then it is time to contact the card company. Chances are you periodically receive consolidation offers from them anyway so you might have the documents you need on hand. If not, all you have to do is call the customer service line and give the needed information to the representative.
The information you need is the account numbers and balances of your other cards. This information is given to the company, and they pay off your other cards for you and transfer the outstanding balance onto the card you want to keep. This process isn’t instant so you should continue to make payments on your other cards so one isn’t missed, and you wind up with a black mark on your credit score.
Before you consolidate, it doesn’t hurt to ask the credit card company if they will lower your interest rate if you transfer a large balance to your account. If you have a good history with the company and pay your bills on time, you can often negotiate a lower interest rate, and that will help lower your monthly payments even further.
It might be that your chosen card doesn’t have a high enough available balance to consolidate your other cards onto. Before choosing a different card with a higher interest rate, call the company first and see if they will increase your available balance for the purpose of consolidation. You never know until you talk to them and find out.
Once your other credit cards are paid off, they are still active. Paying them off doesn’t close them so in case of emergency, you will have them to fall back on. Most experts would probably advise you to keep them out of your reach though so you don’t use them routinely.
There are many benefits to the decision to consolidate credit card debt. You’ll have fewer payments to worry about each month and your overall monthly payment for your credit cards should be lower. That can give you more breathing room with your budget. If you choose a card that has a great reward program, you might even get some nice perks for increasing your balance through consolidation.