5
REASONS WHY YOU MAY WANT TO CONSOLIDATE YOUR
CREDIT CARD DEBT
If you didn’t
already know it, we now live in a consumer
society driven by easy short-term unsecured
debt. Most of this is denoted in the form of
credit card debt, with nearly all of us having
to-hand more than one credit card on which to
call when the kids want those new sports shoes.
The fact is
though, credit card debt is expensive to fund -
interest rates are high, and there is nearly
always some form of credit-usage fee in our
account statement.
To counter
this, below we look at 5 reasons why you might
want to exercise the option to consolidate your
credit card debt:
REASONS FOR CREDIT CARD CONSOLIDATION
Because interest rates are high
The principal reason why most people consider switching credit cards and
consolidating all of their outstanding credit card debt into one card is
because the interest rates on their existing credit card are just too high.
Here, as you may be aware (from all the advertising that is thrown at us), not
all credit card issuers offer the same interest rate (although they are closely
related in a broad spectrum). Moreover, in this highly competitive market, some
credit card issuers now offer significantly lower rates of interest than some of
the other more “traditional” credit card issuers.
So, if you think that it is going to be financially beneficial to you to
consolidate all of your existing outstanding credit card debt into one credit
card debt that is offering a lower interest rate, which will equate in
significant savings, this may well be a very sensible option to take.
Because of the annual fees
A common trend among credit card issuers over recent years has been to ask
members to pay an annual usage fee for the credit card. In certain cases this
annual fee can be expensive - especially where you may make use of more than one
credit card and are faced with having to pay several annual membership fees.
However, credit card issuers now know they’re in a fight to get new customers
and so some of them are offering use of their credit card without you needing to
pay any annual membership fee and not asking members to pay an annual membership
fee is a second worthy reason why you may want to consolidate your credit card
debt.
Do, however, keep in mind that if you consolidate credit card debt because of
this issue, make sure that the credit card issuer has not accounted for this by
adding other hidden fees or a higher rate of interest on the card - otherwise
you may find that the overall cost of funding the debt adds up to more per annum
than if you just pay the annual fee with your existing credit card issuer!
Consolidating the credit card debt as a personal loan
It is a sad fact of life that many of us do not know how to budget our spending
on our credit cards. We see the limit on our cards and seem to think that we
have to spend all of this money in the next 24 hours, otherwise they may take
the card away from us! We then spend the next 4 years trying to pay back all the
debt we just accumulated. All of this stress is then compounded by the fact that
we have to make, at minimum, the minimum monthly repayment to the credit card
company.
To avoid this, and to try and find a way to source our debt at a lower cost many
of us turn to the option of consolidating all of our outstanding credit card
debt as a personal loan, which we then pay back monthly.
Although both of these debts are similar in nature, i.e. unsecured, the personal
loan method is much cheaper than the credit card debt. So, if you have credit
card debt outstanding that you believe will take you more than 1 year to repay,
the time may well have come to consider the third reason why it may be more
beneficial to consolidate your credit card debt as a personal loan.
Because we now have a bad credit rating
Those of us who allow our existing credit card debt concerns to get on top of
us, to the extent where we are no longer in a position to make the monthly
minimum repayments, have sadly just come across the fourth reason why you may
want to consolidate your credit card debt - because you now have a bad credit
rating!
Because they’re paying me to do it
The last reason why you may want to consolidate your credit card debt into one
debt is because the credit card issuer is paying you to do it! Believe it or
not, the credit card industry has now become so competitive that issuers are
fighting among themselves to get people to sign up to their card. Here, when the
card issuer knows you have an existing credit card, they’ll sometimes ask you to
transfer the balance of your outstanding existing credit card debt to them, in
return for which they’ll reduce some of the debt from your outstanding balance!
Be careful though, those warning signs regarding interest rates and fees still
apply.
Do you have an idea or
recommendation regarding credit repair?
Learn
about credit card consolidation.
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