Find out in what circumstances you should make a credit card debt consolidation. Learn how you can save money that can then go towards paying off your debt sooner.
Credit card debt consolidation is about bringing together any existing credit card debts or store card debts onto a new credit card. This a good idea for anyone who has debts on these other cards that they are finding difficult to pay off, and are being made worse by the higher regular rates of interest they are being charged. Consolidating debts to a credit card with a lower rate of interest leaves more of your cash available to be directed towards reducing the debt. The provisos are that none of the debts are on a card issued by the new provider, and that the amount falls within the credit limit you are allocated (in fact, 95% of the new credit limit).
The best approach is to use a credit card comparison website and research the best low-interest credit card balance transfer offers, then go ahead an make an application. You should also make sure that you make your request for a credit card debt consolidation as you are completing the application form. There is a special page for this purpose. This is because the offer period starts from the date the account is opened, so you don’t want to lose any of those precious days at the special rate.
Choosing the best credit card debt consolidation option:
You must analyse the state of your finances to know which balance transfer offer will suit you best. There are four options with credit card debt consolidation:
- The introductory 0% offer – This is normally for a period of six months.
- The introductory low-rate offer – This is usually for twelve months, but you will also find them for six and nine months. Rates vary between 1% and around 6%, depending on the card’s other features.
- The ongoing low-rate offer – This is a great debt consolidation card if it also has an introductory deal included, because you won’t have to worry about a huge jump in the interest rate once the offer ends. The Bankwest Lite MasterCard has such a deal at the moment.
- The life-of-the-debt offer – This allows for a credit card debt consolidation that offers a fixed low rate on the balance transfer until the debt is fully repaid. These are more usually found on Platinum level cards.
Points to keep in mind:
Budget carefully to make sure your debt can be fully repaid before the interest rate reverts to the regular one. You should also pay as much as you can each month and not just the minimum amount.
Last, but not least don’t make purchases on the card you are using for your credit card debt consolidation. You will find that your purchases at the higher rate will not be touched by your repayments until your transfer is fully repaid.
This is a guest post written by Timothy a personal finance writer for Balance Transfer Card.