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Consolidate Credit Card Debt

Why Transferring Balances Is Usually Not an Effective Way Consolidate Credit Card Debt

You may be thinking about how to consolidate credit card debt if you have charged a lot of purchases. Often when your balances on your credit cards become too high, your initial reaction is to consider transferring the balances to another credit card with a low or zero interest rate. This method to consolidate bills may seem like a simple solution, but there are several things you should know before pursuing this approach.

Things to Know About Transferring Balances to Consolidate Credit Card Debt

When those television or web ads tempt you to consolidate credit card debt via balance transfers, remember these six tips:

  • Although transferring balances you lower your monthly payments, the total amount you pay increases if you pay only the minimum payment. You would need to make larger payments to improve your results.
  • When you consolidate your credit from a higher-interest to lower-interest card, you'll almost always be charged a balance transfer fee that's a percentage of the total amount of debt you're transferring. There's no cap on these fees, so the higher the amount you're transferring, the higher the percentage. In the end, you might not save any money from the transfer.
  • The low or zero interest rates are usually introductory rates, lasting from six months to a year. When the interest rate rises, it might be higher than it was for your old credit cards. And if you miss a payment, are late, or exceed the credit limit, your interest rates climb quickly. This defeats your goal of saving money from consolidated credit.
  • If you transfer balances and add new debt to the new credit card, you can't always control how your monthly payments are applied. Typically the credit card issuer applies your minimum payment to the debt with the lowest interest first, resulting in a longer repayment period for the balance.
  • Repeated balance transfers to consolidate credit card debt can harm your credit score, preventing you from borrowing money for a house or car.
  • You need good credit to qualify for a balance-transfer card, so if you're thinking about consolidation after you've accumulated a mountain of debt, you may be considered a risk and may not be approved.

These tips share one theme: You're borrowing money to pay off your debt. It's the same as taking out credit consolidation loan. So if you keep charging on your old credit cards while paying on the transferred balances, you're plunging deeper into debt.

The Best Way to Consolidate Credit Card Debt

The best way to consolidate credit card debt is to avoid accumulating more debt. American Consumer Credit Counseling (ACCC) can show you how. For more than 22 years, our debt management programs have helped thousands of clients like you with consolidating debts in a responsible, effective way, without additional borrowing. You make one convenient monthly payment directly to us, and we distribute the money to your creditors. We may even be able to get your creditors to lower your interest rates and reduce or eliminate late fee and over-limit fees.

American Consumer Credit Counseling provides free credit counseling and low-cost solutions for managing debt and learning how to become debt free. The certified credit counselors in our debt relief center have helped thousands of individuals and families create plans for lowering credit card debt or eliminating personal credit card debt altogether. In our initial credit counseling sessions, our counselors thoroughly review a client’s financial situation before discussing all available options. Counselors can provide debt settlement advice or explain how a debt settlement program works, compare debt forgiveness and debt management plans, offer suggestions for dealing with debt recovery companies, and answer questions about debt consolidation qualifications. ACCC also provides debt management services with a fee structure that is among the lowest in the industry.

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