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What You Need to Know About Credit Card Consolidation

According to the results of a survey commissioned by NerdWallet, the average household in the United States has a revolving credit card debt balance of around $6,849, which amounts to an average of over $1,100 in yearly interest. The study also revealed that 10% of Americans with credit card debt need more than a decade to settle them, and 9% believed that they would not be able to pay them at all.

If you are among the many Americans described above who are having difficulty paying off your credit card debt through the usual payment schemes, you should consider Credit Card Consolidation. Consolidating your credit card debt is one of the most effective ways to be debt-free faster.

How Does It Work?

As the name suggests, it combines all your credit card balances into one. This way, you can make a single monthly payment focused on paying the principal amount instead of spending money on interest charges.

If you’d like to consolidate your credit card debt, you may consider any of the following options depending on your overall financial situation:

  • Credit Card Balance Transfer

This strategy means you will be transferring your outstanding credit card debt into a new credit card with a lower interest rate, lesser penalties, and more favorable benefits. Make sure to select a credit card with a 0% applied percentage rate (APR) on balance transfers so that you can have the chance to pay what you owe interest-free in a limited time.

  • Debt Management Program

With the debt management consolidation strategy, you will be working with a certified credit counselor to create an affordable repayment plan. The counselor will be the one to negotiate with your creditors to lessen, if not altogether remove, the interest costs.

  • Debt Consolidation Loan

Another way to consolidate your credit card debt by securing an unsecured personal loan with a low-interest rate. The money you loaned will then be used to pay off your outstanding credit card debt. Note that it is crucial to secure a personal loan with flexible terms of payment and a much lower interest rate than what you are paying for your existing credit cards, so you can significantly save money on interest costs.

What Should You Consider When Consolidating Your Credit Card Debt?

While Credit Card Consolidation can be useful in helping you become debt-free, this strategy can also cause more financial problems if misused. To ensure that this method will work in your favor, consider the following tips:

  • Focus on paying off debt when you choose credit card balance transfer and avoid making new charges.
  • Never use home equity loans to consolidate your credit card debt as you can risk foreclosure when you miss payments.
  • Be wary of excessive consolidation fees and costs. Remember that your primary goal is to eliminate debt, not to owe more.
  • Stick to your budget and significantly cut your spending habits after debt consolidation to ensure that you can make timely payments.

Ultimately, it is critical that you do the math, ponder on your financial situation, and carefully select the right option that is most suitable to your circumstances. Take note of the tips and information above as you plan your debt-free solution and work hard to ensure that whatever strategy you choose will be most beneficial to you.

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