Consolidating credit cards is really an effective way to solve a debt problem – especially if you have the right circumstances for it. Research shows that it is very easy for people to accumulate credit card debt. Apparently, people pay more when they use their credit cards instead of cash – sometimes up to 83% more.
A lot of people find it easier to spend using credit cards because it is very convenient. Not only that, it allows you to spend more than what you can really afford. You can just use your future earnings to pay it back when the billing statement comes.
But that is actually where the problem is. Some people find it so convenient that they easily abuse the use of their credit cards. When you fail to do something about it, the high-interest rates of the credit cards can easily overpower the financial security that you have built for yourself. Do not let this happen. You have to start consolidating credit cards so it will not become a threat to your financial future.
Habits that will make consolidating credit cards more effective
Consolidating multiple debts is more than just putting them under one credit account. More than anything, you need to learn certain financial habits that will help you improve your overall financial situation. Not only will this strengthen your debt relief efforts, but it will also help you sustain the debt freedom that you will enjoy in the end.
While you are consolidating your credit card debts, you need to perform certain tasks that will magnify the benefits of your debt relief efforts.
Update your budget plan
First of all, you need a budget plan. You need this regardless of the financial situation you are in. When you have this plan, you have more control over your finances. It is easier for you to check your current financial position – especially the expenses that you pay for every month. If there is a need to spend on something new, you can check the current list that you have so you can make adjustments. It is a great way for you to make smarter decisions. With this knowledge in mind, it is easier for you to guarantee the success of your efforts to consolidate your credit cards.
Stop using your credit cards
Another task that you need to do to ensure that you will benefit from consolidating credit cards is to stop using it. At least stick to this until after the debt relief effort is done. By keeping a tight leash on your credit card spending, you are not adding to your balance. You will have less to pay off. The sooner you can pay off your current balance, the sooner you can use credit cards again. Of course, you have to remember to keep your credit card spending low and to make smarter choices about it.
Make spending adjustments
Finally, you also have to make sure that you make the necessary spending adjustments while you are still paying off your debts. If you want to be successful at DIY debt consolidation, it is important to monitor where your money is going. You want to focus only on the things that you really need so the rest of your limited resources can go to your debt payments. The bigger the amount that you can pay, the shorter the repayment plan. When you get out of debt faster, you can start working on your other goals to improve your financial position.
How to make effects of consolidating credit cards last
After consolidating credit cards, your work is not yet done. It is important for you to realize that this debt solution is merely a repayment tool – not the actual payment. You still have a long way to go in terms of paying off what you owe.
But even if you have completely paid off your debts, you have to keep on making an effort to make sure it stays that way. According to reports, Americans pay their credit card debts but gained more than 90% of it back in no time at all. If you do this, you will just be stuck in a perpetual state of debt. Soon, this debt cycle will stress you out and one mistake might pull you over the edge.
If you have successfully gotten yourself out of debt after consolidating credit cards, make sure you fulfill these tasks to protect your new found debt freedom.
Choose the cards you really use, close the rest
Start by taking a look at all the credit cards that you own. Are you really using all of these on a regular basis? If not, then close them one by one. While having a lot of cards will help with your credit utilization rate, it will only increase the temptation to use credit. Not only that, you may be paying annual fees that are slowly draining your finances. Just keep the cards that you really use and earn rewards from.
Set credit card spending rules
It is also important for you to set rules that will guide you on how to use your credit cards. For instance, you can decide to use the card specifically for your groceries. Or you will only use it to buy gas. Once you have figured out how you will use it, you can set a budget for it. You have to stick to this budget so you can keep yourself from overspending. This budget should be put aside each month so you can pay your credit card bills in full within the grace period. This will keep the finance charges from being added to your debt.
Keep track of your credit card spending
Finally, you should also learn how to keep track of your credit card spending. It is very easy to overspend when your credit card feels like it holds endless funds. But we all know that is not true. It has a limit and maxing out your card is never a good thing. Not only that, the bigger the debt, the harder it is to pay off in full. You will end up having to carry over the balance on the next billing cycle and when that happens, the finance charges will be added to it. The bigger the balance, the higher the charges. Instead of letting the debt grow, it is easier to just track your credit card spending. That way, you will not waste the positive effects of consolidating credit cards.