Should you Consolidate Debt into one or a few Credit Cards?

Ever wondered how debt consolidation using your credit cards works? Credit card balances can attract interest rates higher than 19%. If you have multiple credit card balances, one option would be to consolidate this debt into one or fewer cards. This helps to make the debt more manageable as you reduce the number of monthly bills you pay.

Advantages of debt consolidation using credit cards

• Credit card companies sometimes offer promotional low-interest rates. You can take advantage of these low rates to save money and get out of debt faster.
• A single credit card debt is easier to manage since you can track exactly what you owe and make the repayments in good time.
• With a credit card debt, there are no restrictions as to how much you can repay per month. Whenever things aren’t going well, you can pay the minimum amount required. When you have cash, you can pay as much as you can afford in order to get out of debt faster.

Disadvantages of debt consolidation with credit cards

• It’s not easy to qualify for a balance transfer credit card if you have a poor credit score. Most people seeking debt consolidation already have financial problems and may not qualify for this.
• It’s important to find out how long the low promotional interest will last. Most of the time, this interest lasts for just a few months. You may not have cleared the loan when the interest rates shoot up. When the normal interest rates apply, you can end up spending all your monthly disposable income paying credit card debt.
• By paying smaller minimum monthly repayments, you have some extra cash to work with every month. If you lack the financial discipline, it can take you a very long time to pay off the debt.

What debt consolidation method works for you?

There are other debt consolidation options to consider such as a home equity line of credit or an overdraft. It’s important to discuss your needs with a credit counselor who will assess your unique situation and advice on what method best works for you. Remember that not all credit counselors will offer you advice with your best interests at heart.

Is credit card consolidation right for me?

Consider these 3 below to determine if credit card consolidation is the best option for you:

• How much credit card debt do you have? Check your credit card statements to understand how much you owe.
• How much can you realistically afford to pay?  Consider how much monthly repayments you can afford.
• How long will the low promotional interest rate last? Don’t be attracted to a low-APR or promotional interest rate that will only be there for 2 months, after which you will be required to pay a much higher rate.

If you are unable to find a lender who can qualify you for a debt consolidation loan, this is probably the next best option for you. You can get a balance transfer credit card, which allows you to transfer your high-interest rate credit card to a balance transfer credit card with a very low-interest rate.