Guide to Consolidating Credit Cards

Credit card consolidation is a popular choice for many consumers. Done correctly, it can reduce the amount owed on monthly payments which can make it easier to pay off credit card debt while affording the rest of life. More importantly, it can lower interest rates to make it possible to ultimately pay less in total than would have been the case if paying the debt on separate cards. However, many people make errors in consolidating their credit cards which reduce these benefits.

Here are the steps that every consumer should follow when consolidating credit cards:

• Do it yourself. There are companies out there that want to consolidate your credit cards for you. In most cases, you aren’t going to get the best deal if you do it this way so consider doing it yourself.

• Be organized. Make a spreadsheet of all the credit cards that you have and the available credit on them. Include the interest rate on the card and the minimum monthly payment. Seeing it on paper will help you know where you can move money around.

• Consider whether you can pay off any of these cards immediately. If you have access to any additional money, use it to pay off some of the balances so that you can do less transferring of funds.

• Determine if you have loan options other than putting several credit card balances on one existing card. The best way to do credit card consolidation is to access a low-interest loan with a high credit limit. Getting a line of credit from your bank or seeking a home equity loan if you are a homeowner is a better way to access funds for consolidation than simply combining credit card balances. If you know someone with money to loan, getting a personal low-interest loan is another option.

• Make sure to look at all of the variables before making a financial decision. This is going to require that you do some math. First, you’ll want to make sure that the consolidation is going to lower your monthly payments. Second, you’ll want to make sure that the consolidation doesn’t excessively increase the total amount owed. Finally, you’ll want to make sure that any fees associated with the consolidation are minimal.

After consolidating your debt, it’s critical that you focus on paying off that debt. It’s great that it’s been reduced but you want to get it eliminated. This means working on a budget for your spending and a payment plan for your consolidated debt so that you can systematically reduce the amount that you owe and free up funds for future expenses.