Should You Consider a
Credit Card Debt Consolidation?

Many people turn to credit card debt consolidation when they feel the management of their credit card debt is getting out of control. What they typically do is to transfer or consolidate all their credit card debt to one credit card. This bill consolidation loan option allows them to deal with one credit card statement and one company. There are some serious pros and cons about using this type of credit card debt management service.

Credit Card Debt Consolidation Pros

Many companies offer a twelve-month no interest grace period where no credit card interest is charged. This makes the entire payment applied to the principal and can quickly reduce the overall debt.

Besides the no credit card interest, you will often get a better interest rate after the initial twelve-month period.

Therefore, in the short term, consolidating your credit card debt can reduce your interest rate, debt and monthly payment.

However, before you rush to consolidate your credit card debt, be aware of the potential problems.

Credit Card Debt Consolidation Cons

First, your interest will go up at the end of the trial period. For this to be a viable alternative, you must consistently pay down your balance over the grace period. That means you must get very serious about overcoming bad debt management habits. If you don’t, you will pay more in interest and you will have a longer pay period. That means you will increase your debt and payment time.

Second, read the fine print under the terms of service agreement. Look for the section about payment default. This section usually discusses three things: 1) what happens if you make a payment late, 2) what happens if a payment doesn’t process (go through) correctly and 3) what happens if you go over your line of credit.

In most instances, your interest free grace period is cancelled when one of these three problems occurs. That means the interest rate you expected to get after the twelve-month period is immediately applied. Your interest free trial period is over.

In addition to the cancellation of your free interest, the interest rate that is applied is usually much higher than the rate you would have gotten after the twelve-month period.  In fact, it will probably be higher than any interest rate you had on any of your credit cards prior to consolidating your debt.

So, if you are considering credit card debt consolidation, be careful. Read the terms of service very carefully. Remember, you must make the payments on time. Learning good credit management skills and using this is critical. You must pay down your balance during the grace period or you will be worse off than you were before you entered into your credit card debt management service.

Editors Choice

Credit Card Debt Consolidation