Consolidating all the debt you have accumulated on your separate credit cards is perhaps one of the best things you can do for your financial health and well-being. Consolidating your credit card debt is helpful for several reasons and we will look at some of the best reasons for doing so.
Consolidation
* Makes it easier for you to improve your credit history and therefore, your credit score.
* Helps you get better rates on interest should you wish to opt for a balance transfer or even a new credit card.
* In fact, you can even get a more attractive rate on a consolidation itself. This helps you save quite a bit of money. For example, make a comprehensive list of the rates of interest charged on each of your cards. Then, calculate the average rate of interest by dividing the total accumulated interest by the number of credit cards you own. Compare this average rate with the new consolidated rate of interest you are being offered. More often than not, the new consolidated rate will be much lower than the average interest rates of the cards combined together.
* Helps you move from higher rates to lower ones. For example, during your consolidation calculations, if you see that some cards actually require you to pay lower interest, then don’t include those cards in your consolidation. Only give up the more expensive cards in exchange for a consolidated card and keep the cheaper ones also. This way, your average interest will be much lower than the consolidated interest you have been offered.
* Saves stress. Instead of paying several credit cards bills, you can pay only one consolidated bill each month.
* Gives you an opportunity to come out of the debt trap. Consolidated debt helps you pay lower monthly instalments which means your monthly outgoings are lower, which translates into savings. It may not be much, but it is a beginning.
If you can surrender your other credit cards also, then your savings and expenses will increase because the amount you pay for one consolidated debt is much smaller than payments made to several cards at a time. If you can, then try to get a few months as an interest free period. This, you will see over time, will really make a dent and will reduce your debt amount substantially. While you negotiate, ensure that you are not paying any hidden fees or extra amounts as transaction or handling costs, etc. This will add to your debt burden.
It is important to realise that by consolidating your cards it is possible that you may end up paying a larger amount over a longer period. Additionally, after consolidating your debts you should avoid additional credit card borrowing as this may amalgamate the situation and reduce the benefits associated with consolidation.