Credit Card Debt Consolidation (aka “Balance Transfers”)
Credit card debt is a nightmare of a problem for a vast majority of the American population. According to the Federal Reserve, in 2012 the average household carried just under $16,000 in credit card debt and approximately 56% of them had trouble making their monthly credit card payments. Credit card debt consolidation is one of many options to examine in your quest to reduce your credit card debt.

So What is ‘Credit Card Debt Consolidation’?
Credit card debt consolidation is the process/strategy to consolidate debt from multiple credit cards into either a lesser number of credit cards (ideally one or two credit cards) or a single line of credit. Credit card debt consolidation is also referred to as a “balance transfer” where you transfer your balance of one credit card to another credit card. Generally, the balance transfer (or credit card debt consolidation) is done from credit cards with higher APR to credit cards with lower APR. Credit card debt consolidation can also be achieved by going for a bank loan (at a lower interest rate) and using that towards paying the debt on the higher APR credit cards. This loan is then paid-back to the bank in the form of monthly installments. The goal is to get your credit card balances all transferred to a credit card or loan with a lower interest rate or a 0% balance transfer loan.

Just because you have credit card debt doesn’t necessarily mean you have bad credit. Though many people struggle with their monthly credit card bills, many people still manage to pay them on time. If your credit score is still in good standings, you probably already get offers from credit card suppliers and banks for credit card debt consolidation or balance transfers. However, credit card debt consolidation is a serious exercise and you must exercise caution so that you don’t get into deeper trouble. When going for credit card debt consolidation, you must properly analyze the offers from various banks and credit card suppliers.

Check the time period for which 0% APR is being offered and also the APR that would be applicable after the lapse of that period. Generally, 0%APR is valid for a 6-12 month period only. So, if you are confident of paying back a considerable amount of debt in that period, this kind of credit card debt consolidation will work for you even if the APR (post 0% period) is a bit higher.  However, if that is not the case, the long term APR is going to be the most important thing for you. If the long term APR is more than the APR for your current credit card, this kind of Credit card debt consolidation would just create more debt for you.

Also, check processing charges, related fees etc. before you actually go for a balance transfer or credit card debt consolidation offer. Another good idea is to check with your current credit card supplier to see if they are offering any balance transfer promotions. (and while you have them on the phone ask them if they can lower the interest rate on your card).

Paying off one debt with another isn’t the perfect solution, but if you can get a lower interest rate you’ll be on a much faster track to getting the actual debt balance paid off.

There are many highly rated books about managing and paying off debt. These are some of my personal favorites:


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