Is It a Good Idea To Consolidate Credit Card Debt?

Posted by Jesse Smith

November 29, 2009

Are you finding it difficult to keep up with your credit card bills? You might think about consolidating your credit card debt.

Obtaining a personal loan or other financial product to consolidate your credit card debt is one way to accomplish this. The way this works is that you would obtain a personal loan, let’s say, and use it to eliminate your credit card debt.

There are several reasons to consolidate credit card debt, but the most common reason is to lower monthly payments. Doing this will mean that you will have more disposable income at the end of each month.

To put this in perspective, if you have three credit cards with monthly payments of $30, $50, and $70, you would attempt to obtain a personal loan which would be used to eliminate the three credit card balances. Once this is done, your three credit cards will be paid off and you will have only one monthly payment, instead of three. To make things even better, the chances are good that the monthly payment for the personal loan will be lower than paying all three of the credit card bills ($150) each month.

People also like to take advantage of lower interest rates and special promotions which are offered as a means of paying off credit card debt. If your credit cards have relatively high annual percentage rates (15% or higher), just think of the money you would save with a 6.9% personal loan.

People also like to consolidate their credit card debt in order to simplify their life. Only having to worry about one payment each month, instead of two or three or four credit card payments, just makes life easier. Doing this also makes budgeting simpler because the personal loan payment will probably be a fixed amount each month and due about the same time every month.

If the idea of a personal loan doesn’t appeal to you, you can decide instead to apply for a low interest, high credit limit credit card and use this card for the consolidation. Once you receive the new credit card, you would transfer the balances of your other credit cards to this new credit card. Be sure to shop around for the best credit card deal and make sure you get the lowest annual percentage rate that you can find.

Consolidating credit card debt is a very common financial solution. It can assist consumers in organizing their debt, taking control of their finances, and even saving money in the long term.

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