Should You Do a Credit Card Consolidation?

Credit card consolidation is when you have a large amount of debt that is branched out in several different credit cards, loans, mortgages, and other form of credit, and you take all of those forms of debt or credit, and you “consolidate” them into one big form of credit. In many cases, consolidating your credit card debt is not a bad idea, but in others, this type of solution only makes things worse.

Say you have three credit cards, all on which you have a balance within a seventy-five percent range of your credit limit. Besides that, you have a mortgage on your home that you are only six years away from paying off after a twenty year mortgage plan. You are thinking about debt consolidation, and you want to know what would be the best way to go about it. It is important to know what kind of debt consolidation possibilities exist out there, and to know just which one is going to get you out of debt faster with the least amount of risk.

Option 1: Low Interest Rate Credit Cards

When you think about consolidating your debt, this may be one of the best ways in which you could do it. Shop around for a new credit card that has a great interest rate that you could easily pay a large balance on. These kind of credit cards could be a great solution to your old, high interest rate cards if you are disciplined enough to pay your bills on time and not rack up the debt on this new credit card too.

Be careful, though, because sometimes these credit card interest rates are too good to be true. You need to know if the low interest rate you got on your card will change over an extended period of time, because sometimes these rates are only introductory. Credit card companies use teaser rates to get people interested in their cards, then eventually the new and wonderful card is not so wonderful anymore, leaving you in more of a tight spot than you were to begin with.

Option 2: Home Equity Loan or Line of Credit

This option can be very risky. By putting your credit card debt into your home, you basically say, “If I do not pay my bills, you can have my house.” Be careful when you consolidate your debt into your home, and be completely certain that you will be able to pay your bills on time and with ease. If you do this, consolidating your debt into your home equity line of credit will be a great solution, because the interest rates are usually much less in this case than with credit cards.

Option 3: Debt Consolidation Loan

Getting a loan may be the solution for you. However, you must know first if you will really be paying less. Because of your financial trouble, you may not be qualified for a low interest rate, therefore you end up paying just as much or more than you did before.

Lowering Your Credit Card Interest Rates: All You Have To Do Is Ask

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The greatest thing about credit card interest rates is that you can call the company and ask them to lower your interest rate. It’s as simple as that. But there are a few conditions. Allowing just anyone to call up and lower their interest rates would be just ridiculous, and it would probably cost the companies quite a bit of money, considering all the irresponsible spenders out there. But this attribute can act as a reward for those who are disciplined in their use of credit cards. Here are a few of the conditions that must be met before your credit card company will lower your interest rates.

1. Have a good credit rating

Maintaining a good credit score will increase your chances of getting an interest rate reduction. Your credit score is what will determine the company’s trust in you, and it will increase or decrease your chances of getting a lower interest rate, depending on how good or bad it is. Having good credit says to the credit card companies that you are dependable, therefore because you are a good customer with good credit, you deserve to have your interest rate lowered.

2. Don’t have a big balance

Having a large balance on your credit card account will lessen your chances of changing your interest rates for the better because if you are deep in debt, credit card companies may believe that your potential to get further into debt is greater. The deeper into debt you get, the more likely you are to fail to pay your bills on time. This will in turn not only disqualify you for a decrease, but it will actually increase your interest rates.

3. Send in more than the minimum

When you pay on your credit card, there is a minimum monthly payment you must make, no matter what. If you have the means to pay a little extra on your credit card bills, do it. This will show that you are eager to pay off your debt, so you are less likely to go bankrupt, and more likely to make your payments on time.

4. Pay on time

Getting an interest rate decrease will be much more difficult if you have not paid your bills on time. In fact, one of the consequences of not paying on time is having your rates INCREASED. You must pay your monthly credit card payment each month, even if it is just the minimum, because the rewards are substantial, but so are the punishments.

Getting your credit card interest rates raised is can be a great advantage to you, but just like any other rewards you might get, you must obey the rules before you reap the benefits. You have to use your credit wisely. You must pay your bills on time and keep your balance at a level in which you can pay it off soon and without strain. These, among other things, will help to raise your credit score, allowing credit card companies a reason to give you a decrease on your interest rates.