Using Credit Cards to Consolidate Debt
Your debt reduction plan may involve debt consolidation if you have a lot of bills. Applying for a debt consolidation loan is an option. If you cannot qualify for a new loan because you have too much debt, you may be able to qualify for a balance transfer offer with an existing credit card. Here are some things to consider about using a credit card to consolidate debt.
Low Interest Debt Consolidation
Credit cards tend to have higher interest rates than debt consolidation loans. However, you may qualify for a balance transfer offer at a lower rate of interest. Having good credit might even get you a zero percent balance transfer offer.
When considering low-interest rate credit card transfers, look at the number of months you have at the low rate. Some low rates are only good for a limited time, so it’s important to know what rate you can expect to pay after the offer ends. In some cases low-interest balance transfers are good until transferred debt is paid in full, as long as you stay current on monthly payments.
No More Credit Card Debt
It doesn’t make sense to use a credit card to consolidate debt if you go out and make more purchases on your cards. Once you consolidate debt put your credit cards away or destroy them so you won’t be tempted to overspend. As you pay off your credit card debt make an effort to add extra to your minimum monthly payment. Doing so not only gets the debt paid off sooner, but decreases the amount of interest you pay over the long term
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Loading ...Do You Have Secret Credit Card Debt?
A recent survey by CESI Debt Solutions found that 80% of married couples spend money their spouse doesn’t know about. The provider of debt management and debt counseling services polled 200 Americans and found that 18.5% of married people have a credit card their spouse doesn’t know about and 15% have a secret bank account.
Secret Purchases
While there can be a variety of reasons someone decides to spend money in secret, 60% of those surveyed said they keep purchases secret to avoid problems at home. Furthermore, 38% feared that if their spouse found out about their secret spending it would result in a separation or divorce. The most common purchases made in secret are clothing and accessories, food/dining, beauty/personal care items, and gifts.
Financial Infidelity
If you, too, regularly buy things without your spouse knowing and/or have secret credit card debt, there could be a problem. Financial infidelity can be a symptom of serious problems in a marriage. Having credit card debt your spouse doesn’t know about indicates a lack of trust. But it also could mean that you have a problem controlling compulsive spending and are afraid to be found out.
Get Help with Debt
If your spending has gotten out of control and you have a lot of credit card debt, consider getting help from a debt counseling firm. A debt counselor can help you get to the root of financial problems and put together a plan for paying off debt and curbing the urge to spend in secret.
(No Ratings Yet) Loading ...Credit Card Debt and Balance Transfers
What should you do if you receive a balance transfer offer in the mail? All you have to do is fill out the little checks or call a toll-free number to activate a transfer offer. It’s an easy process that could help you reduce credit card debt…or can it. There are some pros and cons for using balance transfer offers for credit card debt.
Debt Reduction Takes Time
Even if you choose to use a balance transfer offer you still need to come up with a debt reduction plan. A transfer won’t erase your credit card debt. Only you can do that by coming up with the cash to pay down your balance month by month. This takes time so be patient.
Debt Consolidation
A balance transfer can help you consolidate debt and lower the amount of interest you pay. However, consolidating debt can backfire if you end up using open credit lines after transferring credit card debt. Do not transfer balances and continue your old spending habits.
Get Help with Debt
You may be unable to handle your debt woes on you own even with the help of a balance transfer offer. A debt counseling agency can help you put together a debt reduction plan and work through the issues that are contributing to your problems with debt.
Read the Terms
Using a balance transfer offer should not be your first plan of action to reduce credit card debt. But if you decide to go this route, read through the terms of any offer you are considering so you know exactly what’s involved.
(No Ratings Yet) Loading ...Consumers can have love-hate relationships with credit cards; they love the convenience and benefits offered by credit card companies, but paying high interest and fees makes it difficult to reduce credit card balances even when paying more than the minimum amount required each month.
Legislation designed to protect consumers is meeting with mixed reactions from credit card companies. Anxious to recoup losses associated with the new rules, some credit card companies are raising interest rates, increasing or imposing membership fees, and are reducing “niche” credit cards tied to retailers and services that reflect consumers’ interests and spending habits.
The economic downturn has caused some credit card issuers to slash credit lines and reduce or charge more for other financial services including checking and savings accounts. While consumers with good to excellent credit can negotiate with credit card issuers and financial institutions, consumers with fair or poor credit ratings may not be able to negotiate lower rates and fee waivers.
Good Credit? Here’s Some Good News
Effective debt management requires paying close attention to who and how much you owe. Credit card companies compete for business by offering low introductory rates to open a new account. These offers can also encourage transferring balances from your existing credit card accounts to your new credit card account. This can be a great way to reduce the cost of debt if:
- You can pay off the debt transferred within the introductory period of no to low interest.
- Transfer fees (typically 3 to 5% of each balance transferred) plus the introductory interest rate on the new credit card are significantly less than the annual percentage rate you’re paying on your credit card balances.
- There are no membership fees or other fees that reduce your potential savings.
- You can stop using credit cards once you’ve completed your balance transfers.
Newsweek reports that some credit card issuers are lowering rates they charge during introductory periods and extending the length of the introductory periods, which can vary from six months to a year or more. This can help you pay off credit card balances at less cost.
Bad Credit? Consumer Credit Counseling and Debt Consolidation Programs Offer Solutions
Credit counseling and debt consolidation services may be able to help if you cannot qualify for low cost balance transfer offers or debt consolidation loans. Credit counseling and debt consolidation services typically work with clients to find affordable solutions to repay credit card debt. This process requires reviewing your financial situation and determining how much you can afford to pay toward credit card debt.
Credit counselors can also help you design a cash based budget and negotiate the terms of your debt repayment plan with your creditors. These programs provide the added benefit of debt consolidation because you make one scheduled payment to your credit counseling service and they pay your creditors.
(No Ratings Yet) Loading ...Credit Card Debt and Rewards Programs
Paying off credit card debt could result in you being bombarded with new credit card offers. Some credit card companies have increased marketing efforts for their cards or introduced new rewards programs or other incentives. Discover Financial Services, for example, recently said marketing expense for the third quarter is going to be at the highest level since the third period of 2008.
Stick with Debt Reduction Plan
Think long and hard before accepting new offers from credit card companies. While it may seem like a good idea to sign up for cash back or other rewards offers, these programs usually come with a price. Here are three reasons taking advantage of rewards programs could derail your debt reduction plan:
- Credit card rewards programs often have higher interest rates than non-rewards cards. Higher interest can cause your credit card debt to creep upward before you even realize it. If you are carrying a balance on credit cards, it’s important to shop around for a lower interest rate.
- You may be tempted to run up credit card debt just to accumulate points. Many rewards programs offer one point for each dollar spent and may have other special offers that boost points totals.
- Points usually expire after a period of time. It’s important to regularly check your points balance to make sure you don’t miss out on using them. If your rewards program allows you to get cash back or pay down the balance with points, take advantage of the offer.
Review Rewards Terms
The wrong credit card rewards program could slow down your debt reduction plans, so read through all the terms before signing up.
(No Ratings Yet) Loading ...Learn About the Changes to Your Credit Card Statement
Changes keep rolling out in credit cards category - some which may provide information to credit card users that might help them manage their debt levels better. One recent change is that as of July 1, 2010, the credit card companies are now required to inform card holders of the amount of time it will take to pay off their credit card debt balance if they only make the minimum payment. Do you think this information might help you to change how you view your debt load?
The folks over at FiveCentNickel (a blog which has a list of zero percent balance transfer credit card offers and a summary of what they consider the best credit cards) have used information from the Federal Reserve to explain all the changes to your credit card statement. You can mouse over the numbers below to read the details on each part of the statement.
(No Ratings Yet) Loading ...Cashing out Savings to Pay Credit Card Debt
Does it make sense to use your savings to pay off credit card debt? You probably don’t want to do this, especially if it has taken years to build up what savings you have. But if you are desperately trying to keep up with payments for credit card debt and other bills, it may be time to cash out your savings and put it toward debt reduction. Read the rest of this entry »
(No Ratings Yet) Loading ...Federal Reserve: US Consumer Credit Card Debt Levels Falling
The Federal Reserve’s G-19 report contains great news for consumers; U.S. consumer credit card debt is falling. Compared to the 4th quarter of 2008, when U.S. credit card debt reached a record high of $975.7 billion (yes, that’s billion), credit card debt levels for the past 18 months have fallen by 12.6% to approximately $852.2 billion.
Credit Card Debt: Analysts Cite Multiple Factors for Decrease
The Gerson Lehrman Group cites multiple economic factors that contributed to falling credit card balances:
- Consumers are using their debit cards: VISA and MasterCard debit transactions have surpassed credit card transactions since 2008.
- Lower credit lines, fewer applications approved: Analysts pinpoint recent regulatory legislation as a main reason for credit card issuers approving fewer applications and offering lower credit lines. Coupled with consumer decisions to stop or reduce using credit cards, it’s no surprise that debt levels are falling.
- Loss of home value and home equity: During the heyday of home equity lending, consumers could freely tap home equity loans and lines of credit for low cost debt consolidation. As property values have fallen, home equity lenders have tightened lending requirements and reduced credit lines. Homeowners are concerned about losing home equity and are cutting their spending.
- High unemployment and underemployment: As U.S. unemployment rates remain near 10%, and with many jobs cutting hours, U.S. consumers are either struggling or are worried about losing their jobs. Ongoing high unemployment rates are causing credit card loss rates to hover near 10%; this is approximately double the loss rates for 2007. Analysts predict that high loss rates will prevail throughout 2010. Unemployment and related concerns are expected to cause further reduction in consumer credit card debt in the coming year.
Credit Card Debt: Making an Escape Plan
Although home equity lenders have tightened credit requirements, it’s worthwhile to check into getting a low interest debt consolidation loan. If you don’t own a home, but have excellent credit, you may qualify for an unsecured debt consolidation loan through your bank or credit union.
Bad Credit, Deep in Credit Card Debt
Recent economic conditions have caused many consumers to lose their good credit. Don’t be embarrassed by this; instead focus on achieving your debt management goals. Non-profit consumer credit counseling and debt consolidation programs can help:
- Sliding scale for paying for services: Non-profits offer free initial consultations and typically offer a fee schedule based on your ability to pay. Never pay for debt help up front.
- Budget review and financial counseling: Certified credit counselors review your income, debt, and household expenses and help you establish a cash based budget that includes saving and paying off credit card debt.
- Negotiate with creditors: Consumer credit counseling and debt consolidation services work with credit card companies to negotiate affordable debt consolidation and repayment plans. These plans can take several years to complete.
If you need help getting out of credit card debt, please contact consumer credit counseling services for assistance.
(No Ratings Yet) Loading ...Is Credit Card Debt Keeping You from Getting a Job?
Having too much credit card debt can hurt your job search. That’s because some employers routinely check credit reports during the application process. Even if you are highly qualified for a position, your bad credit could be a huge red flag that leads an employer to offer a job to someone else.
Credit Debt Relief
If you find yourself losing out on jobs because of bad credit, it’s important to put together a debt reduction plan to begin repairing credit. Some options for getting help with debt include: Read the rest of this entry »
(No Ratings Yet) Loading ...Credit Card Rewards Can Help with Debt Reduction
You’ve wracked up a lot of credit card debt in the past, but have turned over a new leaf. A solid debt reduction plan is in place and you have stopped using credit cards for new purchases. But did you know that the very credit card that has contributed to money problems could help your debt reduction plan?
Credit Card Rewards Balance
Credit card rewards plans usually allow you to accumulate points each time you make a purchase. Many people sign up for rewards plans but never look at their points balance. If you haven’t checked out your balance lately, it’s time. You could have thousands of points that can be used for rewards. It’s also important to use rewards points before they expire. Read the rest of this entry »
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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