Credit Card Consolidation: Effective Way to Reduce APR
Credit cards are convenient, flexible and useful. They help people make purchases online or move about without carrying lots of cash in their wallets. Unfortunately, some customers misuse their plastics. Having sufficient funds available tempts them to make purchases which they cannot afford. As a result, they accumulate debt and get in a serious financial trouble. If you are in that boat, a mountain of bills piling up on you can really make your life very miserable. One of the best ways to overcome debt is a credit card debt consolidation.
Debt consolidation involves transferring higher-interest balances onto one easier-to-handle and less-costly credit card. The customers will have only one payment rather than several to worry about. Having low APR will let them reduce credit card bills and save money.
For example, a person has three credit cards. The first one has debt of $500 and 15% APR, the second one has debt of $800 and 18% APR, and the third one has debt of $1000 and 14% APR. This means that the person has to pay an interest of $75 for the first plastic, plus $144 for the second plastic, plus $140 for the third plastic. It equals 359 dollars. Then the person undertakes credit card consolidation. He applies for a balance transfer credit card with 8% APR. He still has 2300 debt, but interest charges will be of $184. This means an annual savings of $175! And if the person applies for an interest free credit card, than the annual saving equals to $359! As you see, transferring your balance can be the right step if you want to cut down your credit card cost. However, be careful: there are some catches that can lead you into a financial trap.
Check what your credit limit will be. If it is not big enough, you can end up having several debts instead of one.
Zero introductory rates are just that: introductory. They can last up to 15 months. You need to pay off your debt, or the biggest part of your debt, in full within the introductory period.
Pay attention to how long intro period is and what rates will be afterwards. Opening new credit card accounts every six months could hurt your credit rating.
If you feel that you are unable to pay off your debt in full during the set period of time, than choose low interest rate credit card. Although these cards do not come with 0% APR, you can be sure that your rate remains the same when the intro period is over.
Control your spending and don't accumulate more debt. Cancel your old high interest credit cards. You will have fewer plastics tempting you to spend money.
Prudence and discipline are required. The low rate lasts as long as you make regular on time payments. If you default, the credit company can raise your APR.
Credit debt consolidation can greatly help you get back on your feet if you are able to set up a budget in order to make payments. It doesn't reduce your debt; it just helps you to save on better APR on your credit card balance. If it seems that there is nothing you can do to catch up with your payments; you may consider getting advice from credit counselors. They will help you analyze your spending and find new ways to pay off your debt.
