How To Use "Credit Card Consolidation" As A Method Of Debt Reduction

Once you’ve gotten yourself into more debt than you can comfortably handle which is remarkably easy these days, it’s time to look into how you’re going to get out of the mess. There are a variety of mthods of debt reduction you can use:  debt payoff,  debt settlement, bankruptcy, debt management,  debt consolidation, and debt forgiveness. Some, of course, are easier than others and some are either unlikely or, like bankruptcy, are not a good choice to make.  Depending on your circumstances, you may find that a good choice for you is debt reduction through  credit card consolidation.

Usually it’s going to be those credit card debts that have the highest interest rates.  And, if you fail to make a payment or get behind, they can get even higher.  Unfortunately, the way credit card payments are structured can give you a false sense of security.  Those minimum payments can look fairly small, but pretty soon you’re going to notice that it’s going to take a lot of years to pay off and that almost every cent of your payments are going to interest. 

 Most people, of course, only start worrying about these debts after it has gotten way out of hand. The interest charges, late payment fees, and other penalties can rapidly join and your debt increase to awesome proportions in what seems like no time at all.

 The heart of the credit card consolidation process requires that you transfer all your balances from various credit cards to a single card and take advantage of the differences in interest rates charged by different lenders - and the fact that many credit companies will offer free balance transfer (sometimes even offer a cash bonus) and a low or 0% introductory rate.  Alternatively, you could take an advance from a credit card charging a low interest rate and use it to pay off a card with a higher interest rate. 

 If you can, find a 0% introductory rate card with free balance transfer since normally cash advances begin collecting interest immediately.  Exercise care in selecting a new 0% card.  You have to look carefully at the rules and make sure the balance transfer will also be interest free for the introductory period.  You need to be very aware of the length of the 0% period and know exactly what the interest rate will become.  Moving all your debt to a card that will have a high interest rate in 3 or 6 months is not the best idea.  You may be able to do the same thing again when the 0% period expires but don’t count on it.  It may be smarter to chose a free balance transfer credit card that offers an unusually low interest rate and stick with that until you have your debt under control.

 This process will reduce the amount of interest you have to pay which in turn reduces the amount of the payments you must make.  The extra cash can then be used to pay down the debt more rapidly.  Don’t spend it.  Don’t make any more credit card purchases. Keeping a tight control on your budget is the only way to work yourself free - and the only way to make sure you don’t end up in the same situation again.