Credit card debt consolidation. Those of you who are in debt (in this case credit card debt) often hear this suggestion ‘Consolidation of credit card debt’.
So, what does it mean to ‘consolidate credit card debt’?
Quite simply, ‘Credit card debt consolidation’ means consolidating debts on various credit cards into one (or two) credit cards.
This consolidation can be done through low-interest bank loans or by transferring balances to a new credit card (eg transferring your debt amount, on one credit card or more, to a new credit card).
What should you do when you are looking to consolidate a credit card?
Well, the main thing to look for is the APR or the annual percentage level. Whatever method you use to combine credit cards, the APR will always be the key; in fact, you can say that it is the only criterion to look for.
So if you use a bank loan to consolidate credit card debt, the bank loan interest rate must be lower than the credit card APR for which your debt is consolidated.
Similarly, if you move to another credit card, you must make sure that the APR new credit card is lower than the credit card that you consolidated. However, there are catches that you should be aware of when laying out plans to consolidate credit card debt.
The APR interest rate advertised by most credit card suppliers is a short-term APR interest rate intended to lure you to combine credit card debt with them.
Short term is defined as the APR rate which is only valid for the initial period of less than 12 months or other periods after the APR tariff rises.
When you proceed to consolidate credit card debt with these credit card suppliers, they will offer you a lower (even 0%) APR for the first 6-12 months; and April is much higher after that.
You should check whether this is a higher APR level. Your decision to consolidate credit card debt will only bear fruit if the new APR level is lower than or equal to the APR on your current credit card.
You might check with your current credit card supplier to see if it can reduce your APR (if that works, it will make everything very easy for you).
Before you proceed to consolidate credit card debt, you must understand that consolidating credit card debt will only be beneficial if you promise to adopt and follow a disciplined approach to using credit cards, namely controlling expenses and paying credit card contributions regularly / on time.