Credit Card Debt Consolidation

What is Credit Card Debt Consolidation?

Credit Card Debt Consolidation is essentially a legal consumer debt elimination program that allows a person with credit card debt to combine all of his or her bills into one monthly payment that is affordable. It is possible that someone with debt will have a lower interest rate and monthly payment if they choose credit card debt consolidation. Credit card debt consolidation is appropriate for individuals who are having difficulty managing their credit card debts. Furthermore, credit card consolidation can be a convenient option to become debt free and avoid bankruptcy or similar, serious results.

What is The Credit Card Debt Consolidation Process?

In essence, credit card debt consolidation can be done by the individual or through the services of a professional company that specializes in consolidation.

When consolidation is done by an individual, the person must first reach an agreement with a financial institution or bank. The financial institution or bank will then arrange a loan to pay back all existing creditors. These loans are usually of low interest rates and designed specifically to help debtors resolve their debt issues comfortably. However, before opting for any, one with debt should first shop around carefully and choose the best possible option.

If consolidation is done by way of a professional company, they will provide comprehensive credit card consolidation services that include initial financial analysis and paying off debt through consolidation. However, as a client, the individual with debt has to pay the professional company a certain amount as fees for their professional services. Though some companies are reputable, some are also scams and can take the individual’s money. One with debt should first closely investigate a professional company before an agreement is made.

What are the Types of Credit Card Debt Consolidation?

The main type of consolidation involves a low interest rate balance transfer. This involves the transferring of all credit card balances onto a single credit card. Low balance transfer interest rates are typically promotional rates that expire after a certain period of time. If one is to choose this option, they need to make sure they know when that the low rate will expire and the interest rate that will go into effect. If an individual with debt wishes to use a credit card balance transfer as a debt consolidation loan, he or she will need a credit card with a large enough credit limit to hold all of the credit card debt.

The downside?  Consolidating debt with a balance transfer hurts your credit score. Putting too much debt on one credit card could have a negative impact on credit score as credit utilization increases.

How do you find the best credit card debt consolidation company?

When one is looking for a credit consolidation company to get help with credit card debt, they need to check out the following to ensure that the professional company is reliable:

  • The service background of the company.
  • Accreditations received by the company.
  • How BBB has rated this company.
  • Online reviews/complaints available on the web.
  • Client testimonials found on the company website.

Once the above details are verified, the individual should attend a free counseling session to find out what programs are available, what fees are charged, etc.

3 Tips on credit card consolidation

Here are three tips to avoid making mistakes when you enroll in a credit card bill consolidation program:

Control your spending

The key to any financial problem is getting control over one’s spending. It’s helpful for an individual to  budget using a budget worksheet to calculate monthly income and expenses. A professional consultant at a consolidation company can guide the individual to budget your income and expenses correctly. This will help one avoid defaulting while in credit card debt consolidation program.

Set up an emergency fund

Emergencies happen to everyone, it’s a part of life. Health problems or natural disasters can hit at any time, prepared or not. When one budgets their expenses every month, they should put aside a part of their income (5-10% if possible) for emergencies.

Avoid using credit cards/loans for some time

When using a credit consolidation program, use of credit cards should be suspended. The accounts should not be closed right away but the cards should be set aside for the time being. Payments should be kept up with to totally eliminate the credit card debt.

Credit card debt consolidation, whether done do-it-yourself or through a professional company, can save an individual with debt from many bad scenarios.