Consolidating Credit Card Debts With a New Card

2010 December 7
by Kyle Bumpus
from → Credit And Debt, Personal Finance

Consumers who are on the verge of getting in over their heads in credit card debt really need to rethink their current financial situation. Making it a priority to eliminate all credit card balances is the first step towards a more secure personal finance situation. Dedicating as much money as you can to your credit card debts is the only sure-fire way to pay them off in full and avoid bankruptcy or other last-minute tactics.

For some consumers who simply have too many credit cards to keep up with, one of the main reasons making payments so difficult is that with many cards comes higher debt due to the fees and interests rates of each card. One way to help make paying off balances more manageable is to consolidate your credit cards to just one or two cards that have lower interest rates.

Will I Qualify for a Consolidation?

If you have not yet reached a point of no return where you can’t pay your bills and have missed payments on your credit card accounts, the answer is yes. If you still have a good credit score and payment history, you should be able to find and qualify for a credit card that gives you enough room to transfer existing balances from other cards. This consolidation will subsequently lower the payments on your credit card debt, making them more manageable. If your credit score has suffered due to your credit card debt, it may be more difficult to secure a new line of credit. Bad credit offers will likely attach too high of an interest rate or too low of a credit limit for them to be useful in a consolidation.

What Should I Look for in a New Card?

The objective here is not to secure a new card for new spending but to transfer existing debt from several cards to one card. You should do a thorough search for a credit card that offers a low interest rate and a line of credit that can withstand the total of all other credit card balances. For instance if four of your credit cards have a combined total balance of $4,567, you’ll need to find a card with at least a $5,000 limit to allow room for any monthly fees. Getting too close to your limit or going over will cause additional fees and penalties to be added to your balance. On the other side of that, you don’t want to have too much of a credit limit because it can be a temptation to spend more and it can negatively affect your credit score. Many credit card companies will provide instant approval via the Internet application process. But, as a word of caution, don’t apply for every available credit card because that too can lower your credit score.

How Does Consolidating on One Card Help?

Because you are no longer paying fees and interest on 4 or 5 credit cards, you can combine those multiple payments into one payment toward your total balance. For example, if you are paying $100 each to 5 cards every month, you can consolidate your balance and make a $400 payment to one card. This helps to speed up the time it takes to eliminate the total balance and you are paying a lower interest rate at the same time, meaning you are making progress on the whole balance in a faster period of time, all while paying less in interest charges. Plus, there is an additional benefit of saving yourself some cash each month to keep up with your other financial obligations.

What Else Should I Know About Consolidating with a New Card?

Before agreeing to any credit card contract, read the fine print. Have a clear understanding of what the APR is, how much it costs to transfer balances from other credit cards, and what the terms are for credit card use. Balance transfers are not free and can end up costing you a lot more money than you can afford over time. If you do not understand the terms of the credit card, be sure to contact a company representative before signing an agreement.

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One Response
  1. 2010 December 13

    Great Insights! There are times when it is absolutely necessary to consolidate credit cards and a new card might come in handy. Another thing that can come in handy is to play the Balance Transfer game with credit cards to consolidate credit card debt

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