Credit card consolidation is a common practice these days as it can save an extremely large amount of cash over the life term of your credit card debt. This process entails transferring all outstanding balances from various high APR cards to credit cards that have a much lower interest rate, or possibly even a card that is offering a zero percentage APR for balance transfers, of which there are quite a few.
The reasons why credit card consolidation could be the ideal solution for your debt issue are:
Reduced Interest payments:
As already highlighted, your interest rates may well be extortionately high and are therefore costing you way too much in either APR or your annual fee. By switching to a card that offers a better deal, even if it is only a short term offer, you will save money and you can consolidate again, if needs be, once the low introductory rate ends on the card you have just switched to!
Remove accumulated annual fees:
Credit card consolidation can eliminate the number of annual fees you may be paying. It is not uncommon for people to use a number of cards and the annual fees can soon add up to a large amount of money. Credit cards generally have annual fees of $20 to $25 dollars but some can be as high as $250! You must remember that carrying out credit card consolidation by transferring to a card without an annual charge will only benefit you if your intention is to keep that card for a year, if the card you are considering consolidating onto has an offer that runs for less than twelve months, at which time the APR skyrockets, any benefit you may have gained may well be lost.
Use a credit card consolidation loan:
Using a loan makes perfect sense, not only will you reduce your interest rate but because loans use an amortization schedule your debt is reduced every time you make a payment, unlike a credit card. I will explain; each time you make a minimum payment on a card the majority of that payment is interest and only a nominal amount goes towards reducing your balance which can be extremely frustrating as your balance never seems to go down irrespective of the number of payments you have made. A loan, however, is amortized, which means that your repayments are split between the interest on your debt and the principal (outstanding balance).
Improving your credit standing:
Many people have had their credit scores affected by unintentionally missing or making late payments caused by the number of cards they use. By using credit card consolidation your debt becomes much more manageable and therefore you are less likely to make any mistakes. As well as that consolidation could well have a beneficial reaction to your credit standing.
Reduced balance promotions:
Although the competition for your custom is not as fierce as a couple of years ago some credit card companies are still offering to give you money back if you will transfer your outstanding credit card balances to them, they do this by reducing the amount of your debt by either a set figure or a percentage of the balance. For example; if you were transferring $5000 to a new card and that card provider offered a balance reduction of 4% your new balance would be $4800 as $200 would be shaved off the transferred debt.
Credit card consolidation can save you a great deal of money and make your debt more manageable but always read the small print and be wary about jumping too many times as many credit card companies are now becoming wise to this practice and have started to decline applications when they see certain patterns of consumer behavior.