Since the Great Recession, Americans have been taking on a growing number of credit card debts. Many realize that this trend is unsuitable and sustainable and are now seeking to consolidate many credit cards into one card. This move is meant to reduce the amount of debt and interest paid every year.
What Is Credit Card Consolidation
Credit card consolidation is where you take several bills from various credit card companies with multiple balances and payment dates and merge them into one payment. When done correctly, credit card consolidation can reduce the interest rate and save you a significant amount of money.
A recent study found that American consumers have four credit cards on average, with a combined balance of $6,200. On average, this costs $1,162 in interest every year. Below are three ways on how to consolidate your credit card debt;
- Debt management plans – These are offered by nonprofit credit counseling agencies who work with creditors to reduce interest rates. They also work with creditors to make one monthly payment from your card and distribute it among your creditors.
- Credit card consolidation loans – This is where you borrow a large sum in order to clear your balance on each credit card. This can be in the form of a 401(k) loan, balance transfer credit card, home equity loan, or a personal loan.
- Debt settlement – In this case, you cease paying your creditors and instead enter into an agreement with a debt payment company to allow you to build up a lump sum amount to pay each of your creditors.
Balance Transfer as a Way to Consolidate Debt
Getting another credit card is one of the easiest way to clear your credit card debt. In this case, you need to use the right card that is used to transfer balances from other high-interest credit cards. Balance transfer credit cards always come with an introductory interest rate period and last for about 18 months. Balance transfer credit cards include;
- Discover it® Balance Transfer
- Chase Freedom Unlimited®
- Capital One® Quicksilver® Cash Rewards Credit Card