Smart Borrower Blog

Consider Consolidating Your Credit Card Debt

Apr 24th, 2009 @ 3:32 PM by Alden Smith

It has been said that consolidating your credit card debt is one of the smartest decisions you may make.   Credit card consolidation is a perfect choice for people looking to have better credit.   It is fairly common these days, and gives you the opportunity to combine debt and make a single payment instead of half a dozen.

Ideally, the best reasons for consolidating debt are to get a better interest rate.   Any time you are able to consolidate debt and save yourself money, it is a step in the right direction.

Financial advisers today have changed the way they look at debt, especially credit card debt.   At one time, financial advisors told us to pay a credit card debt before we did anything else.   Now financial advisors are looking at things a bit different.   Today, they find it important that we save before anything else.   It is the old principle of “paying yourself first”.

This makes the idea of credit card debt consolidation even more relevant.   Instead of making   four or five payments at a high interest rate, you make one payment at a better rate.   Not only will this take pressure off you, but will make bill paying much easier.   The best way to handle this is to set up the account to have the payment taken directly out of your banking account.   This way, you know it is paid on time and you have no worries about locating a bill, writing a check, finding a stamp and going to the post office.   However, if you’re living from paycheck to paycheck as many people are today, this may not be a good idea.

Although consolidating your credit card payments into one bill makes life easier, never do it for this reason alone.   You don’t want to pay more money just to avoid making only one payment per month.   Although credit card consolidation is a wise investment, there are some consequences that you should be aware of.

It isn’t advisable to close out all your credit card accounts when you consolidate the balance of each into one loan. When credit card accounts are closed, it is reported to a credit reporting agency.   Chances are good that you will take a hit on your credit rating score.   If you decide to go this route, make absolutely certain that you understand fully the terms of the transaction.   If a credit card consolidation agency charges you a large up-front fee, you may end up owing more than you started out with.   Instead of choosing an agency that charges a fee for their service, seek out an agency that is nonprofit.   An Internet search will help you find these organizations.

Don’t hesitate to talk to an attorney if you are making this decision.   Legal advice is your best bet in this situation.   It took you a long time to get buried in credit card debt, and an hour spent with an attorney will be money well spent.

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