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3 Ways to Consolidate Credit Card Debt

Guest blog written by Linda Richardson, a New Jersey-based financial content writer and enduring learner with an ongoing interest to learn new things. She uses that curiosity, connected with her knowledge as a financial writer, to write about valuable subjects. You can find her on Twitter at @LindaRossie9.

“The universe doesn’t allow perfection.” - Stephen Hawking

This quote by brilliant theoretical physicist, Stephen Hawking, reminds me about credit card debt consolidation. You may be thinking: how is this quote relevant in the world of debt consolidation?

Well, our human life is also not perfect.

You can take my example. I am a working professional. I have my family too. I am unfortunate not to fulfill all their wishes with my income.

I have had to to use credit cards to support my family at times.

Buying something by using a credit card means you’re acquiring debt, and we are not the generation who are satisfied with just one debt. It’s too easy to acquire multiple debts. All these debts have different interest rates and their payment periods are different, too. The minimum repayment option on credit cards gave me relief for a while, but the ballooning interest rate payment did not!

Have multiple credit card debts overburdened you?

“That is ... not beyond our mathematics.”- Stephen Hawking

The consolidation of debts completely runs on mathematics. It has helped us to devise a way of handling multiple debts.

How debt consolidation can help:

  • We should first start with the debt consolidation program. When you enroll in the program, the consolidation negotiators will have a discussion with your creditors. A portion of the interest rates on your credit card debts may be slashed. Debt consolidation gives you a single monthly payment. You only make a solo payment to your debtors. The consolidation specialists will distribute the amount among your creditors. A cut in interest rate means you are saving some money on monthly payment.

  • Next, we can discuss the balance transfer method. I have always adored the balance transfer mechanism for this unique feature: You may get a zero percent interest rate payment facility. To get the benefit you have to be credit worthy. Banks will only be interested to give you a loan at a lower interest rate if your credit score is high, anything above 700 points. Next, you have to always remember when your introductory period is going to end because at the end of this period, the interest rate will take effect. No longer will you be able to pay 0%. Your introductory period may stretch from 6 months to 21 months.

  • Lastly, we have to consider a debt consolidation loan. Similar to the balance transfer method, you have to impress your creditors with a decent credit score if you want to obtain a debt consolidation loan. Again, a credit score above 700 points means your lender will be interested to offer you a loan at a lower interest rate. After acquiring the new loan, what you’ll first do is repay all your existing creditors. Then you will have to repay your new loan through single monthly payments.

People think If you opt for debt consolidation it’ll mess up your credit score. Is this true?

First, you have to understand about credit utilization ratio. It is vital if you want to maintain a good credit score. This is the ratio between total credit available to you and how much you’ve utilized your available credit. It is better to have your credit utilization ratio within 30%. If you’ve maxed out all your credit cards’ limits, it means your credit utilization ratio is full. A full credit utilization ratio will create a bad impression on your credit score. Now, you can choose a new credit card with a low-interest rate and transfer the balance to the new credit card. Your credit utilization ratio will go down. The credit availability will increase again and the debt amount will go down.

Thus, your credit score will be affected positively.

You can read this blog to get more information on how you can improve your credit score.

What’s more?

Some reports say the credit card debt for average Americans is around $6000. This is not a small amount at all. It’s my advice to you to handle your debts wisely, but if you find yourself in a situation with high credit card debt, you have options available to you: a debt consolidation program, the balance transfer method, or a debt consolidation loan.

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