How to Consolidate Your Credit Card Balances

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  • 2/18/12
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  • Consolidating Credit Cards
    If you have racked up debt on a number of high-interest credit cards, it makes sense to transfer your balances to one low-interest card. Consolidating your credit card debt leaves you with only one credit card bill to pay at the end of the month. More importantly, transferring balances allows you to pay off your credit card balance more quickly, especially if you find a card that charges zero-percent interest during the introductory period.

    Read on to learn how you can save money by consolidating your credit card balances.

    1. Apply for a credit card offering a low or zero-percent balance transfer rate. A number of cards offer an interest-free period of up to 18 months, allowing you to eliminate your balance or reduce it drastically. Take care to make all your payments on time, or your introductory interest rate will be replaced with a high rate.

    2. Calculate what you will save over the interest-free period of the card, and compare it to the balance transfer fee. Most low-interest cards charge a transfer fee equaling 3 percent or more of the total transfer. Commit to the transfer only if you will save more in interest than you will be charged for transferring your balances.

    3. Check the interest rate when you receive your card in the mail. There is no guarantee that the teaser rate you were offered is the one you will get, especially if your credit rating is less than stellar.

    4. Exercise self-control, and rein in your spending to pay off your balance before the introductory rate expires. Once the teaser rate is gone, you may find yourself paying rates higher than those offered by regular credit cards.

    5. Resist the temptation to move balances from one low-interest credit card to another after expiration of the introductory rate. Repeatedly opening low-interest accounts while carrying high debt levels looks bad to lenders, and your credit rating may suffer.

    Image Credit: 401k
    Written By: Shannon R

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