Credit card consolidation is one of the effective options to deal with this high-interest debt. According to reports, consumers pay $104 billion on the interest and fees alone. One of the benefits of consolidating credit card debts is to take advantage of a lower interest rate. If you can effectively lower the interest of your debt, you can save a lot of money in the long run. This is why a lot of people have opted to choose consolidation as the solution for their balance.
Of course, the consolidation itself is not the end of the debt problem. While you may have lowered the interest rate or improved the terms of the loan, you still have a lot of things to do before you can really declare yourself as debt free. Credit card consolidation merely shifted your balance into a new credit account that has a better interest rate and terms.
This is the reason why you need to be extra careful with your financial decisions after consolidating your debts. You have to ensure that you will not get sidetracked – especially when it comes to your payments.
How to ensure your credit card consolidation will succeed
There are a couple of things that you need to do if you really want to succeed in your credit card consolidation efforts.
Understand your credit card problem
Analyze why you ended up with a huge credit card balance in the first place. Was it because you did not have an emergency fund? You need to save up for it. Maybe the reason is overspending. If that is the case, you need to check your budget plan and revise it so your expenses will not exceed your income. There are so many reasons that led to your credit card debt problem. Until you identify and solve it, you will never be debt free.
Choose the right consolidation strategy
There are different ways to consolidate debt. You can get a debt consolidation loan or a personal loan, pay off all your credit cards and then focus on paying back the single loan. There is also the option to get a balance transfer card with a 0% introductory rate. Although you have to pay a balance transfer fee of 3%, you may be able to save a lot of money if you can completely pay off your balance before the 0% rate expires. If you want to get the help of a professional, you can also opt for debt management. This will involve a credit counselor who can negotiate in your behalf so creditors can agree to a lower interest rate. When you enroll in their debt management plan, your credit cards will be frozen – making it easier to control your spending while you are paying off your debts.
All of these options are effective but it has to match your specific debt and financial situation.
Stop using your credit cards
Another tip when going through credit card consolidation is to stop using your cards for purchases. After you have transferred your balance into a new credit account, it will be very tempting to use it again. Do not give in to this temptation. If you think that your self-control is weak, you might want to opt for debt management. This particular debt relief program will force you to stop using your cards while you are in the midst of the program. But if you can discipline yourself by keeping your cards where you will not be tempted to use it, then the other options may be effective enough.
Stick to your debt solution
Once you have chosen a debt solution, it is very important to stick to it. Pay your monthly dues on time and do not falter. Include it in your budget plan so you will not forget. You should also set up reminders a few days before the due date. That way, you do not have to worry about missing out on a payment. Even if things get a bit difficult at times, you might want to complete what you started. Sometimes, shifting to another debt relief program might cost you in terms of fees and charges.
If you follow all of these tips, you will soon realize how much credit card consolidation can improve your finances. Soon, all your debts will be paid off and you are free to start building and securing your future without the restrictions that usually come with credit card debt.
Tips to use credit cards wisely
Once you have paid off your credit card debts, does that mean you should completely stop using it? Not really. You are free to use it once more. However, you have to be smarter this time around.
Here are tips that will help you enjoy the use of your credit card without falling into so much debt once more.
Include it in your budget plan
You need to set a budget for your credit card purchases. If it is only $500 a month, then you need to stick to that amount. By putting it in your budget, you are clearly defining the limit by which you can use your card. Not only that, the amount should be set aside so that you can pay off your balance in full once the billing statement arrives.
Own credit cards that you really need
You should also take a look at the credit cards that you will own. If you own a lot, that increases the chance of you getting into debt trouble once more. This is why you should only retain the cards that you will really use. Even those that are inactive will still require you to pay fees. So might as well get rid of them and only keep those that you regularly use.
Know how to use the credit card to your advantage
Did you know that a lot of credit card owners did not do their research before signing up for a card? If you want to use the card to your advantage, you have to make sure that you understand the rewards program. That way, you can use it in such a way that will maximize the freebies and discounts that you can gain. This will help you save some money and will also teach you to be smart with your expenses.
If you follow these tips, there is a high chance that you will no longer need to go through credit card consolidation ever again.