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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