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One Easy Way of Consolidating Credit Card Debt

By: John Frazier Click author's name for more of his/her articles

Debt is something that has to be managed, and can easily get out of rule if you're not watchful. Unsecured debt in particular is among the most troublesome financial problems for customers today, and therefore millions of credit card customers are looking for ways of combining credit card debt as a means to better administer their financial responsibilities. While it is essential to get a good handle on your credit card accounts and ensure that you haven't extended yourself beyond your means, consolidating credit card debt itself can sometimes create even more fiscal difficulty if you don't take great care in how you approach this major financial matter.

One very common form for consolidating credit card obligation is to transfer the balances of your elevated rate cards to a credit card that has a lesser annual interest charge. For example, you may have two or three credit cards with balances of a few hundred (or few thousand) dollars each, and those cards may carry an annual interest rate of 17 percent, 18 percent, 20 percent, or even more. Obviously you should be able to save a sizeable amount of money each year in interest by moving those balances to a card that carries a lower interest rate. For instance, you may be able to transfer the balances of those higher-rate cards to a another card that carries only a 13.5 percent interest rate. Still on a balance that is currently being charged only a few percentage points higher, such as 17 percent, you will save substantial real dollars -- certainly enough to judge this as a method for combining credit card debt.

Hold on a minute though.. Before you immediately transfer that balance, there are a number of pitfalls that you may fail to notice when consolidating credit card debt in this fashion, and it is important to consider them before you move your money:

Some credit cards offering lower interest rates may only be offering them as a "teaser" or opening rate. That way the credit card's annual percentage rate may grow at some point in the future, when the teaser rate expires. You ought to check carefully to make sure that you realize exactly what the rate will be in the future as you pay down the balance you transferred from the initial card.

If it turns out that consolidating credit card debt by moving the on hand balances to a lower-rate card will work well for you, then you in fact need to make sure you have a plan to deal with the higher-rate card that will swiftly have a zero balance. Too often citizens can fall victim to the "empty card" syndrome and find themselves charging things again on that newly clear card, simply because it has no balance and it offers a handy payment method. If you fall victim to this state of mind, then you may find yourself right back where you started in no time. Instead, put that card away in a place where you're not likely to use it, unless faced with a severe urgent situation. Otherwise, your judgment to endeavor consolidating credit card debt and saving yourself some funds in interest may come back to bother you.

Combining credit card liability by moving balances to a lower-rate credit card is one feasible way to save money on interest, but beware the dangerous pitfalls of teaser rates and empty card syndrome. Credit and debt have to be managed cleverly, or you may discover yourself in grave financial turmoil.

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