consolidate
credit cards
Consolidate credit cards
When you consolidate your debts, you're looking
to reduce the interest rate or extend the loan term. Since
credit card debts don't have defined loan end dates, revolving
credit can stay with you for what seems like forever if you
just make the minimum payments. What you really need is a
lower interest rate.
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Think about it. Let's say that you have $10,000
in credit card debt spread across the nine cards. If all the
cards require a 2½ percent minimum payment, then consolidating
the cards into one card isn't reducing your minimum payment.
(Most credit cards have a required minimum payment somewhere
between 2 and 3 percent of the outstanding balance.)
Using a home equity loan or a home equity line
of credit (HELOC) could lower the interest rate, especially
if you can use the mortgage interest deduction on your taxes,
but you put your home at risk if you are unable to keep up
with the payments. The home equity loan can also reduce your
payments because the required monthly payment will be less
than 2 percent of the loan amount.
If your credit history is in good shape, you
may be able to consolidate the debt with balance transfers
to a new credit card. Get a copy of your FICO Credit Score
and Experian credit report from Bankrate's Shop & Save
Channel to see where you stand. A low introductory rate will
also have more of your monthly payment going toward paying
down the loan balance vs. paying interest.
Consumer credit counseling can consolidate your
debts and work out a repayment plan. The counselors may be
able to also reduce the interest rate on your debt. Taking
this step will damage your credit history because your credit
report will show that your accounts were not repaid according
to the terms of the credit agreements. Don't take this step
lightly, but if you can't keep up with your bills this is
an alternative to bankruptcy.
source: http://www.bankrate.com/brm/news/DrDon/20020326a.asp
Should I consolidate
my credit card debt?
If they all have the same interest rate, there's
no real need to consolidate these balances. Think about it.
If you have $2,000 outstanding on two credit cards at 16.9
percent, what's the savings in having the balance on one card
at the same interest rate?
Most
credit card agreements have higher interest rates for cash
advances and will also charge a fee for the transaction, too,
so it's not going to be a less-expensive approach to paying
down your credit card debt.
People typically look to debt consolidation
to reduce their interest rate or extend the term of the loan.
Credit card debt is open-ended or revolving credit, so shifting
balances from one card to another isn't going to extend the
loan term. You've stated that all of the credit cards are
at the same interest rate, so that's not a reason to move
balances.
About the only reason for you to consolidate
these balances is if one credit card calculated the minimum
payment as a lower percentage of the outstanding balance then
the other and you were trying to free up some funds in your
monthly budget. You're trying to pay things off, so you should
be paying more than the minimum payment.
A balance transfer to another credit card at
a lower interest rate could help you pay down your balances
faster because more of your monthly payment would be going
toward principal instead of finance charges.
But the credit card companies are getting pretty
sophisticated in putting up barriers so cardholders don't
keep moving on to the next teaser rate, so make sure you understand
the credit terms and balance transfer charges if you decide
to take this approach. Bankrate.com has a feature that can
help you decide if moving balances is the right decision for
you.
source: http://www.bankrate.com/brm/news/cc/20020814d.asp
consolidate credit cards
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