|
||||||||||
Few things are more stressful than juggling high credit card debt. Unfortunately, making only minimum monthly payments on high outstanding credit card balances is almost a sure formula for staying in debt. The earlier you take steps to get off the debt treadmill, the easier it will be.
If your debt is getting ahead of you, consider consolidating credit card balances into a lower interest account. To find out if you are a candidate for credit card consolidation, take this quiz:
- Do you have multiple credit cards with long-term outstanding balances?
- Do you frequently struggle to make the minimum payment on your cards?
- Is your credit card debt increasing instead of decreasing?
- Are you close to or over the limit on any of your credit card accounts?
If you answered yes to even one of these questions, it’s a red warning light. If more than one of these situations describes you, you should consider some form of debt consolidation.
Credit card consolidation involves merging your credit card balances into one, lower interest account. All credit card consolidation strategies have one thing in common. Your interest rates will be lower and the monthly payment due on the consolidated loan balance will typically be lower as well.
What’s the key to successful credit card consolidation? Use the money saved to pay down your debt faster. In addition, look for ways to cut your expenses, and apply the savings to pay down your credit card debt. Consider living on a cash basis whenever possible to avoid spending more money than you have.
While there are many different options for consolidating your credit card debt, the best options are only available for people with excellent credit. This is why it’s so important to act early at the first sign of financial hardship, before your credit deteriorates. Here are some of the main options for consolidating your credit card debt:
Transfer balances to a low interest credit card. The interest rates on this type of credit card can run as low as 7.49% for people with excellent credit.
Use balance transfer checks to consolidate credit card balances. Credit card companies occasionally mail out credit card checks with offers for a low interest for the life of the balance, as low as 3.99 or 4.99%. Although you will pay a balance transfer fee, these are still a great opportunity for credit card consolidation.
Take out a home equity line of credit. Home owners can take advantage of the equity built up in their home to take out a low-interest home equity line of credit to pay off their credit cards.
Make a deal with your credit card company. Credit card companies want to keep your business, and it’s often possible to leverage this to negotiate balance transfers into one of your card accounts at a lower interest rate. To learn more about how to negotiate better terms with credit card companies and other credit card consolidation advice, see this article from Bankrate.com: 6-Step Debt Elimination Program.
All of the above credit card debt consolidation strategies work best for people with excellent or good credit. People with fair credit or bad credit often need to explore other ways to consolidate debt and reduce their payments. At this stage of the debt spiral the options become fewer and harder to navigate.
Consider using a good credit counseling agency to put together a debt management program and negotiate with creditors on your behalf. To find a credit counselor, check your local Better Business Bureau or the banking department for your state, which has a list of all the accredited agencies for that state. A good credit counseling company can often get people out of debt for less than it would cost on their own.
