How To Consolidate Your Credit Card Debt

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The average American family now has over $10,000 in credit card debt, according to recent reports. Many of these families carry the debt over a number of high interest credit cards. If you carry a considerable amount of debt from month to month on different credit cards, you may benefit from credit card debt consolidation.
While the typical loan consolidation is done to lower interest rates or lowers the monthly payments by increasing the life of the loan, credit card debt consolidation is different. Credit card debt typically does not have a specified amount of time in which it needs to be paid back; you cannot lower your monthly payments by simply moving the debt around. There are a few benefits to credit card debt consolidation.

  • You may be able to consolidate from a higher interest credit card onto a lower interest card. Decreasing your APR on the outstanding balance can significantly decrease your monthly payments, interest payments and the amount of time it takes to pay off your credit card debt.
  • The monthly payment may be lower if you have all of your balance on a single credit card. Some cards require lower monthly payments than others.

Bear in mind, if you are moving $2,000 debt from one card with a 15.8% interest rate to another with the same rater, there is not going to be a savings in the amount of interest you are paying on a monthly basis.
So if you determine that credit card debt consolidation is going to benefit you, the steps are relatively simple.

  1. Contact the company that holds the card that you wish to move the credit card debt to. The easiest way to do so is by visiting the company website online. Check out the company's website and search for the section of how to complete a balance transfer.
  2. Call your credit card company using the phone number of the back of the card. When you call, ask to speak to a customer service representative who will walk you through that company's specific rules and procedures for a credit card debt consolidation.      
  3. Check the inserts with your next monthly bill. Many credit card companies want you to transfer your outstanding balances from other credit cards to their cards. Check the inserts that came with your last bill to see if there are details on how to complete a balance transfer.
  4. Write a credit card check. Many banks will provide you with checks that draw from the balance of your credit cards. If this is the case, you can simply pay the balance of one card with a check from another.
  5. Take out a personal loan to pay off multiple credit cards or a high balance on a single high interest rate credit card. You can get loans that will typically have significantly lower interest rates and better terms than those of credit cards. To take out a personal loan, contact your local bank or financial institution and speak to a loan specialist. If you prefer to work through the net, you can also apply for loans through most major banks websites. The two most popular loans for debt consolidation are Home Equity Loans, in which you borrow money against the equity in your property, and personal loans, which are unsecured loans based upon your financial and credit history.
  6. Contact a debt consolidation company. There are many companies you can locate on the internet using a search engine such as Google or your yellow pages. These companies may offer you a discount on what you owe in principle to move your credit card debt to them. They are able to offer the discount depending on your credit rating, outstanding loan balance and the interest rate that they will charge you if you move your credit card debt to their company. If you have $10,000 in credit card debt, they still stand to gain by writing off 10% of it, but charging you 8% interest for 15 years. As the customer, you get a lower interest rate and principle balance and as a business, they gain your interest over an extended period of time.

Make sure that you understand all the terms and conditions of the balance transfer before you complete the transaction. Some banks will charge you a transaction fee or offer a low "teaser" interest rate that will increase after a short period of time.


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