Too many credit cards? It may be time to consolidate
Having multiple credit cards can be tempting as they are a great way to earn rewards such as travel miles or cashback. And having a spare credit card can also come in handy in an emergency.
However, life can be unpredictable; sometimes, we find ourselves buried in credit card debt before we know it. If you can relate to this situation, it might be the right time to consider consolidating your debts. Doing so could avoid the risk of missing a payment and damaging your credit score.
Credit card debt consolidation means combining multiple credit card balances into one. Here’s how you can do it.
Balance transfer card
If you have multiple credit card balances and are looking for ways to manage them, balance transfer cards can be a great option. Also known as credit card refinancing, these cards allow you to transfer your existing credit card balances onto just one credit card that offers a 0% interest rate for a set period, usually between 12 to 18 months. This gives you enough time to lower or pay off your credit card debts without accruing additional interest charges.
A great balance transfer card doesn’t charge any fees for the transfer. Some cards may charge a small percentage of the transfer amount, so it’s essential to read the T&Cs carefully. Additionally, most come with an annual fee, so it’s a good idea to shop around for the best deal by researching and comparing cards.
Before choosing a balance transfer card, here are a few things to keep in mind:
- Calculate whether the interest rate you’ll be saving will compensate for the cost of the fee.
- Pay off the entire balance before the 0% introductory period expires.
- Don’t use the card for purchases until the balance is entirely paid off. That’s because any payments you make will typically go towards the oldest balance – which means you’ll start paying interest on your new purchases until you’ve fully paid off the balance transfer amount.
Debt management plan
If you have multiple credit card debts and are finding it hard to manage, a debt management plan like Safe Debt Management’s Pay-In-One program can help you. It combines all your debts into one affordable repayment, usually stopping interest and penalty fees. You will make a single regular payment to the program, and the administrator will pay your creditors for you.
Debt management plan administrators work with your creditors to reduce or freeze interest and remove some types of charges like late fees. This way, you may end up paying less than you owe, and you don’t have to worry about making multiple payments.
This is a good choice if you’re struggling to pay your credit card debts but don’t qualify for alternatives. Remember, this plan’s suitability depends on your circumstances, requirements, and objectives.
Personal loans
A personal loan can also be a good option for consolidating your credit card debt. Personal loans are typically unsecured, so you don’t have to provide collateral. The application process is quick and easy and can be done online or over the phone. One of the best things about personal loans is their flexible terms. Moreover, some lenders may still consider your application if you have a low credit score.
Home equity loan
If you own a home and its value has increased over time, or you have paid off a significant amount, you could utilise the equity in your property to draw down a lump sum amount that can be used to pay off your credit card debts. As the underlying asset secures this type of loan, the interest rate is typically lower than other types of loans.
However, it’s crucial to approach this option with caution, as although it may initially improve your monthly financial position by getting rid of those credit card debts, you could end up paying a considerable amount in the long run by spreading this debt over the term of a standard home loan.
Consolidate your credit cards now
Consolidating your credit cards is best done sooner rather than later. Waiting until you cannot pay all of your balances is never a good idea. If you feel like you’re about to face some financial difficulties, don’t worry; we’re here to help. Our Pay-In-One program allows you to combine your unsecured debts of $5,000 or more (such as credit cards) into ONE affordable repayment plan. To learn more, arrange a FREE no-obligation assessment with one of our debt specialists today.