Credit Card Consolidation FAQ

Read this credit card consolidation FAQ to get the answers to your questions regarding consolidating your credit card debt. With your questions answered, you can make the decision whether this is a smart financial move for your situation or something you should reconsider.

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Some of the most frequently asked questions regarding credit card consolidation revolve around whether this financial move will save enough money to justify the effort. One great thing about consolidating credit card debt is that many financial institutions make it a simple and seamless process.

Here are some of the most common credit card consolidation FAQs:

There are several reasons when credit card consolidation makes sense, including:

• You have several credit cards and would like to consolidate them all into one account to simplify your finances.
• You have high interest rates on the credit card accounts and will save substantial money every month by consolidating into an account with a lower interest rate.
• Some of your credit card debt is in an account with an introductory APR that is about to expire, which will raise your monthly payment significantly.
• You are attempting to pay off all your debt entirely, and one of the steps includes closing all your credit card accounts, but you don't want to close the accounts with balances intact.
• A divorce or other separation of assets forces you to switch your credit card debt from joint accounts into an individual account.

Consolidating your credit card debt combines two or more accounts into one account, preferably with a lower interest rate and better terms.

Combining credit card debt from multiple accounts into one account can save quite a bit of money in the long run, especially if the consolidation includes a steep drop in interest rates. Consumers looking to consolidate credit card debt have more than one option:

• Open a new credit card account with a lower interest rate and sufficient available balance to conduct a balance transfer.
• Obtain a personal loan through a financial institution to pay off the credit card debt.
• Obtain a loan secured by the equity in a home.

Obtaining a home equity loan or line of credit to consolidate credit card debt has pros and cons. While the interest rate is generally low and the interest paid potentially tax deductible, using home equity can become an incredibly tricky situation if financial difficulties arise. Lenders can foreclose on a home if home equity loan payments aren't made.

Some lenders will accept delinquent debt for consolidation, but the interest rates will be high and the terms of the loan may not be desirable. People who have delinquent credit card debt, and who are unable to work directly with the credit card company to renegotiate the debt, may want to consult a credit counseling agency.

Credit card consolidation can actually do more harm than good if the person pays off the debt and then starts utilizing these cards again. This results in new debt being piled on top as the old credit cards are utilized for purchases. Consolidation can be a great idea for consumers who are ready to get control of their debt and get it paid off once and for all, but borrowers should be aware that freeing up the credit lines of the paid-off accounts can prove enticing. You don't have to close the accounts after they are paid off. In fact, having the unused credit on your credit report can be an advantage for your credit score.

Check with your preferred lender to find out what options are available to you. With so many viable options available for credit card consolidation, studying your options is a smart move.

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