Thinking Money | Free Financial Advice and Tips

A Few Ways to Consolidate Your Credit Card Debt

Posted on 19. Jan, 2010 in Credit cards, Loans and debts

Americans love to carry credit cards or plastic money in their wallets. On average almost 14% of Americans carry 10 or more cards. Some may argue this is not sensible as having that many credit cards can be detrimental to your finances.

It is reported an average Joe blogs American carries around $4,000 of credit card debt equating to 1 trillion dollars for the entire country! This has been an upward trend over the past 10 years. Unfortunately, Americans still can’t live without their cards.

Credit card debt consolidation

The new way to get help is by credit card debt consolidation. When you have multiple cards with various interest rates and are facing difficulties to keep up with the monthly payments, you can easily combine all your balances into one manageable monthly payment with a reduced interest rate. The idea seems right for you when you’re desperately seeking a way out to manage your high-interest credit card balances. Now what are the ways of credit card debt consolidation?

Ways of credit card debt consolidation

Given below are the ways in which you can consolidate your cards:

1) Using a balance transfer card or teaser card

The teaser card or balance transfer card comes with an introductory rate which is well below the existing rates of all your cards. You don’t need to pay any annual fee for this card. You can transfer all the balances of your other cards to this card and pay them off with ease. However, you might be asked to pay a transaction fee for transferring your balances.

2) Home equity loan

If you have built up considerable equity in your home, you can use it to borrow a home equity loan and pay off all your cards with the loan proceeds. The interest rates for these loans are fixed and affordable. Moreover, the interest is tax-deductible and the loan allows you to borrow a big amount that is sufficient to clear all your outstanding balances. However, the shortcoming of this type of a loan is that you can lose your home if there is a payment default.

3) Personal loan

You can take out a personal loan from a bank or credit union at an affordable rate and pay off your cards. However, this is also a loan that you need to pay off afterwards.

The new credit card rules came into existence on August 20, 2009. These legislations have modified the manner in which credit card issuers can make gains from people by lowering the interest rate hikes and late fees. This is something really encouraging but you should remember that if you want to be debt free, you must try to stop using your cards and cut down on your spending.