When Is It a Good Idea to Consolidate Credit Card Debt?

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Most of us have used a credit card at some point in our lives, and we all know how easily it can lead to a serious debt situation. Perhaps there’s a holiday, children’s clothes, a wedding, presents, food or something else to be paid for. The point is that most people have been there and ended up borrowing to pay for the things they needed.

It’s easy to forget how quickly one can find themselves spiralling downwards under the pressure of living expenses and debt obligations. Nothing can prepare you for how suddenly debt can take over your life and the real stress it can cause.

Thankfully, debt consolidation can help to relieve the financial pressures you’re facing if you have multiple debts to repay. If you’re struggling to pay multiple credit cards, credit card debt consolidation might be the right fit for you. Here are 6 reasons to consider consolidating your credit card debt.

What Is Credit Card Consolidation?

What exactly is credit card consolidation and how does it work? When you consolidate debts of any kind, you typically use a larger loan or credit card to pay off all of your debts. This means if you have multiple credit cards, you’ll pay them all off with this new loan.

Then, your finances will be much easier to manage. You’ll only have one payment each month to worry about, and this typically comes with a lower interest rate as well. It’s all about simplifying what you owe so you can pay your debts off faster.

When should you consider consolidating your credit card debt? It’s likely worth looking into if any of the situations below apply to you.

1. Your Existing Interest Rates Are Too High

If you’ve accumulated credit card debt, then you may already be feeling the financial burden that high interest rates can bring. This is especially true if you have multiple credit cards or personal loans to repay every month.

Finding a more appealing interest rate is one of the best reasons you have to consolidate debt. By searching the market, you can increase your chances of finding a credit card with lower interest rates than what you’re currently paying. If a credit card isn’t available, you can always consider taking out a personal loan with the same plan in mind.

However, you should always look at what new banks and lenders are willing to offer you first. More often than not, your existing lenders won’t do you any special favours when it comes to lower interest rates.

Once you have a new credit card or personal loan, you can transfer over all of your other debts and have only one monthly repayment to take care of. This could allow you to make huge savings throughout the year and make your repayment schedule far less overwhelming.

2. You Can Use Annual Fees to Your Advantage

In today’s world, it’s becoming more and more common to see annual fees accompanying credit card agreements. Annual fees can vary from lender to lender but if you have multiple credit cards, you’ll soon feel the impact.

Thankfully, the market for credit cards is saturated and this gives you a great chance to find one without an annual fee attached. If you’re really lucky, you might find a credit card with a lower interest rate than you already pay, as well as no annual fee.

However, it’s vitally important to remember to check over your new terms to make sure there aren’t any unexpected fees. Sometimes credit card issuers will increase interest rates or include hidden costs to offset there not being an annual fee.

3. You’ll Remove Sources of Debt

Debt consolidation will remove the sources of credit that accumulate your debt. If you transfer the total debt of five credit cards over to one then you can forget about multiple interest rates and fees. In addition to this, you’re essentially removing several ways in which you could spend money that you don’t have.

Once you have your debt consolidated, you should consider cutting up your only credit card. Alternatively, you could store it somewhere hard to access or give it to a trusted loved one for safekeeping.

This way, you’ll never have to worry about overspending and creating debt again. You’ll be paying off your debt month by month and seeing the benefits of debt consolidation.

4. Your Credit Rating Will Improve

If you’ve missed any monthly repayments on your credit card, then your credit rating has probably taken a hit. Keeping track of multiple payments is challenging. By consolidating your debts, you can help to get your credit rating back on track and to where it was before.

Increasing your credit may not seem important, but it could be vital for you later in life. Having a positive credit rating can be crucial for gaining mortgage approval, car finance, or something as simple as a personal loan.

5. You Feel Overwhelmed by Debt

Debt overwhelm is a very real experience. If you’re struggling to keep up with payments and make a dent in your balance, it’s easy to feel exhausted and burnt out. Stress and anxiety go hand-in-hand with debt, and these feelings are very real.

If you’re starting to feel like you’re underwater, it’s time to take action. One unfortunate event like sudden job loss or a change in your living situation could leave you struggling to make ends meet. A loan or credit card that’s designed for consolidation is much easier to pay long-term than multiple forms of debt.

6. Consolidation Is the Best Option

Last but not least, you should only consolidate your credit card debt if it’s the best option for your financial goals and situation. Like all financial decisions, it’s not one-size-fits-all.

There are alternatives to consolidating credit card debt like:

There are different pros and cons to all of the options above, along with debt consolidation. This is why it’s essential to consider how much you pay, how much you can afford to pay, and your long-term debt payoff plan. When in doubt, don’t be afraid to ask for help from the debt professionals.

Is Credit Card Debt Consolidation Right for You?

There’s no doubt that consolidating debt is one of the first steps you should consider if your credit cards are out of control. This will certainly make your finances much easier to manage and the long-term benefits could be life changing.

While these reasons above are all valid reasons to choose to consolidate your credit card debt, it’s still worth exploring your options. Debt Busters is here to help if you’re still wondering how to consolidate debt. Simply contact our experienced team at Debt Busters to see how we can help you today.

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