The Pros and Cons of Credit Card Consolidation

You may be asking yourself “Are those credit card balance transfers really worth the fees?”

A lot of people use multiple credit cards for purchases and then end up needing to consolidate that debt to reduce paying higher interest rates, but is that really the best way to consolidate that higher interest debt? How do you know which 0% or low-interest credit card balance transfer to choose?

There are several factors to keep in mind if you are considering consolidating your debt with these balance transfer offers.

First of all, keep in mind that you should be paying down your debt and not extending it, because you never know what might happen in the future – you could lose your job or be forced to move for personal reasons. So, you always want to try to keep your debts as low as possible which will help improve your credit score, which qualifies you for lower-rate loan options when needed as well. Win-Win!
Introductory 0% APR credit cards are one of the most cost-effective ways to transfer an existing credit card balance, as they will not charge any interest against your account until the introductory period is over. When moving balances to this type of introductory 0% APR credit card, your goal should be to pay as much of the balance as possible before the introductory period ends and to not make any new charges on this new card — that will keep you from adding interest charges to your new credit card.
Avoid thinking of continually transferring balances to escape from paying your credit card debt. While your credit score may currently allow you to open new cards, a perpetual habit of opening new cards to transfer your balance will definitely drive your credit score down – which won’t solve your credit problem. Think of balance transfers as a one-time window when you will commit every bit of income you can to reduce your credit card balances before the introductory period expires and interest rates kick in.

So if you believe you would benefit from consolidating your debt, make sure to do your homework and find the best credit card consolidation offer for your financial situation. According to Chase, transferring your balances can be a way to reduce the interest payments from your current credit cards, but any balance transfer should be done with great care.

Advantages to Consolidating Your Credit Cards:

Credit card balance transfers can move your current credit card debt from a high APR to a lower (or 0%) APR, reducing the amount of interest you will owe each month.
Once approved, the transfer of funds can be quick, allowing you to address your credit card problems immediately.
Transferring the balances on multiple cards to a single card is a simple way of improving debt management.

Disadvantages to Consolidating Your Credit Cards:

When introductory 0% APRs expire, your entire balance can be charged interest, and often at a very high rate.
Balance transfers often require a balance transfer fee, which amount to 3-5% of the total amount you are looking to transfer.
Opening multiple credit cards in order to make balance transfers can reduce your credit score significantly, making it even more difficult to earn approval for a balance transfer credit card the next time around.
Your interest rates on balance transfer cards can reach even higher levels if you are more than 60 days late on a payment.
Most credit cards have a strict limit on the maximum balance you can transfer. Make sure that limit meets your debt consolidation needs before committing to a balance transfer strategy.
You may be tempted to use your new available credit, leading to additional credit card debt.

Remember knowledge is power, and the more you know about your credit card debt and these balance transfer options, the better equipped you will be to make a financially sound decision that best fits your financial situation.

The Pros and Cons of Credit Card Consolidation

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