If you are like many Americans, then you have around $8,000 worth of credit card debt. Maybe it’s for a legitimate reason, or maybe it’s because you bought things you couldn’t afford. Whatever the case may be, the interest payments on that debt is most likely eating you alive. High interest rates enable credit card companies to stay afloat in the midst of so many people not paying their full debt back. The consumers that can afford to pay the high interest basically help cover the losses that the credit card companies incur when they are not repaid by their customers. If you are stuck with lots of debt that is bound by high interest, then you should consolidate credit card debt as soon as possible.
The first step in credit card consolidation is to sit down and look at all the credit cards you have. You will want to lay each card on your table and then get a piece of paper and put it underneath credit card. Write the following information under each card: amount owed, APR, balance transfer rules, and credit limit. Having this information at your fingertips in a highly visual way will help make your credit card debt consolidation go much easier.
What you are trying to do is find the card that has the lowest APR so that you can transfer the other debt to that card. This will drastically reduce the amount of interest that you pay each month. If all of your cards are high interest, then you should consider looking at zero percent credit cards for the sole purpose of a balance transfer.
Before you actually attempt to consolidate credit card debt, you should call the bank that issued your card to ask them a few questions. You should ask if they would be willing to lower the APR of your card. You should also ask if they would agree to waive balance transfer fees since you are in a tough spot financially. Lastly, you should if they will attach the low APR to the debt that is transferred. Many people don’t bother to consolidate credit cards because balance transfers will usually have fees associated with them and can also have a high interest rate. You should always read the fine print of your credit contract because banks will sometimes reserve the right to attach high APRs to transferred debt.
Consolidating credit card debt also requires some people skills. If you are on the phone with a representative and they do not have the authority to help you, then be as nice as you can and ask to speak to someone that has the power to help you. Make sure to assure the representative that they have been very helpful and do not get angry with them or confront
ational. Even if you speak to someone with the power to help, there is no guarantee that he/she will actually help you. Just be as polite and kind as possible for your best chance at success.
When you consolidate credit card debt, you need to look out for short-term 0% offers. If you are not able to repay the debt within the given timeframe then you could potentially be in a worse position than when you started. After the initial 0% period, the rate shoots up dramatically. The best way to make sure this does not happen to you is to try to negotiate with you bank to get a low long-term interest rate to repay your debt.
You should always be wary of debt relief companies that offer to help you get out of debt faster. There are definitely legitimate companies out there that will help you become debt free, but there are ten times as many that are only looking to scam you. Even if you do go with a legitimate company, the effect to your credit score can be devastating. Your credit score is essentially destroyed for 10 years. Using a debt relief company effects your credit score in the same way that bankruptcy does, only with bankruptcy you are not required to repay the debt.
Another credit card consolidation option you may want to consider is taking out a second mortgage. If you have enough equity in your home, then you can use it as a means of debt consolidation by taking out a loan against that equity to pay off all your credit card debt. The interest on the second mortgage will be lower than your credit card rate so you will be saving money. Instead of paying the credit card companies each month, you will be making a single monthly payment to the mortgage company.
Since going this route is a big decision, it is best to consult a financial advisor to see if your current situation warrants such an action. While getting a second mortgage may seem a bit extreme, sometimes this is the single best way to reduce your interest payments.
