Does Credit Card Consolidation Cost Money?
Credit card consolidation is a process that borrowers use to combine all of their credit card debts into one debt. Credit card consolidation does not cost any money – it saves you money!
The biggest benefit to credit card consolidation is having a lower interest rate on your consolidated balance. If you had high interest rate credit cards and combine them all into the one consolidated balance at a low interest rate, it will save you hundreds if not thousands of dollars.
Credit card consolidation allows the borrower to have just one monthly payment instead of many payments each month. This makes it easier for the borrower to see exactly how much is owed and keep track of it all – if they don’t continue to use their other credit cards after their debt is consolidated.
One option for credit card consolidation is to take out a home equity loan or a line of credit and use this money to pay off the credit cards. A personal loan is also a good option if you have a good credit rating so you get a low interest rate. Contact your bank or credit union about consolidating your debt. Since you are already a member of their bank, they will want to work with you in a favorable way more so than another bank would.
You could also get a low interest credit card that has a 0% introductory rate and transfer your balances from your other credit cards to this credit card – just make sure that the rate after the 0% introductory rate isn’t high.
Making double the payments as required will help to eliminate the debt faster than paying the minimum balance, so do this whenever possible whichever method you choose.
Your credit score will be affected by credit card consolidation, but only as much as any loan would. Consolidating your debt is worth the effect on your credit score because it will help you eliminate your debt. The biggest tip here though is to stop using your other credit cards. Cut them up if you have to and close them if it is too tempting for you. The drop in the credit score will be worth it because you won’t be using those cards and going even further into debt.
If you decide to consolidate your credit cards make sure that you read all of the fine print with whichever method you choose. Many do charge a transaction fee for each balance transferred. Often it just gets lumped into the total loan amount and will still save you money in the long run. Make sure also that your consolidated credit card interest rate is the lowest possible. Always remember that if you don’t think it is a good deal, you can inquire about lower rates or fee charges – the worst they can say is no.
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