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
(No Ratings Yet)
Loading ...Falling consumer credit card debt: Are we learning a lesson?
This week’s news brings interesting implications for consumer finances. First we learned that existing home prices have slumped to record lows, which has the media buzzing about the “new role” of owning a home. The new role is that our homes no longer function as limitless ATM machines. No more buying electronics, recreational vehicles, jewelry, and designer wardrobes with home equity loans and lines of credit. Under these circumstances, it appears that consumers would again turn to credit cards for the instant gratification of discretionary purchases. No way. Americans may finally be getting the message about the high cost and consequences of carrying high credit card debt.
Federal Reserve: Credit card debt decreases for 21st consecutive month
The Federal Reserve reports that credit card debt levels are continuing to fall, and that average credit card debt for individuals has fallen to $4951 as of June 30. This is the first time since 2002 that average consumer credit card debt has fallen below $5000. This is a trend worth continuing. Although recent legislation helps consumers in some ways by limiting credit card fees and requiring credit cards to notify customers in advance of arbitrary rate increases, many credit card companies are raising interest rates to recoup the income they’re losing due to caps on penalty fees. High cost debt is a particularly heavy burden during times of economic uncertainty.
Debt consolidation and credit counseling services provide help, support
Debt consolidation through a home equity loan or personal debt consolidation loan is often a first step to gaining control of credit card debt. What if you can’t borrow against your home or can’t qualify for debt consolidation loans? In situations where you can’t qualify for debt consolidation loans, a consumer credit counseling service may be able to help. These agencies act as a credit card debt consolidation service without loaning money. Instead, consumer credit counseling services offer debt consolidation and additional benefits:
- Reviewing your finances and developing a cash based budget
- Designing an affordable credit card debt repayment plan
- Negotiating with creditors to lower or eliminate finance charges and fees (based on need)
- Communicating with creditors on your behalf, which usually stops harassing calls to you, your home, and your work
- Administering your debt repayment plan for a low monthly fee, often based on ability to pay
- Avoiding bankruptcy through financial counseling and affordable debt repayment
Don’t put off taking “charge” of your credit card debt a moment longer. Contact a credit counseling service for debt help today.
(No Ratings Yet) Loading ...Credit Card Debt: Floating Down the River of Ruin
Carrying excessive consumer debt is not only a burden in the figurative sense, it weighs on many aspects of daily living. Ask yourself the following questions, and you can better understand how debt can damage more than your budget:
- Do your know how much you owe? Credit card debt increases quickly if you’re making minimum or late payments. Make a list of your creditors, your balances, and the annual percentage rate (APR) you’re paying for each account to help you prioritize repayment and make a debt management plan.
- Do you argue over money? If you and your significant other can’t agree on household finances, and are accusing each other of overspending, you may be headed up “debt creek” without oars.
- Do you hide or avoid opening credit card bills? This indicates two problems–you don’t want to face what you owe and/or are concealing the truth from yourself and your partner. Aside from forgetting to pay hidden bills, you can also violate your partner’s trust. Getting debt help before navigating such troubled seas may save more than your finances.
- Do you hide purchases made with credit cards? This is a sign of overspending that can lead to out-of-control credit card debt.
- Are you treading water? If you’re only making minimum payments on your accounts or taking cash advances from one card to pay another, you’re making a bad situation worse.
- Do you avoid answering the phone? If collectors are calling, you’re already in trouble with credit card debt. Contacting a consumer credit counseling and debt consolidation service can help you arrange affordable repayment terms without accruing additional penalty fees.
- Are you having problems at work? If your boss has warned you about receiving (or avoiding) collection calls at work or your debt is causing you to be distracted, it’s time to get debt help.
- Do you run out of cash well before your next payday? This indicates a strong need for debt management and credit counseling. Non-profit credit counseling can help you develop a cash-based budget along with solutions for repaying credit card debt.
- Do you frequently borrow money from friends and family? Borrowing money “just for a few days” gets old if you’re asking for another loan soon after repaying the last one. Getting a debt consolidation loan through your bank or seeking credit counseling can help take the pressure off family and friends.
Rather than risking your health, relationships, and employment, please get debt help immediately. Credit counseling services can be the lifesaver you need when you’re drowning in credit card debt.
(No Ratings Yet) Loading ...Illinois Attorney General Lisa Madigan explains why consumers need protection from debt settlement scams by comparing them to doctors who make patients sicker rather than returning them to good health. Blogging on the Huffington Post, Ms. Madigan notes that passage of the Illinois Debt Settlement Consumer Protection Act enacts the strongest protection in the U.S. from unethical debt settlement operators. Madigan estimates that 30 to 40 percent of bankruptcy filings occur after consumers have dealt with debt settlement companies. Here’s how debt settlement scams typically work:
- Consumers respond to promises that their credit card debt can be lowered.
- Non-refundable fees are charged up front; these fees can total hundreds to thousands of dollars.
- Consumers are told to stop paying their credit card debt and to send that money to the debt settlement company.
- The debt settlement company sets the money aside in a trust account or escrow account.
- When a sufficient amount of money is accumulated (as determined by the debt settlement company), the debt settlement company attempts to negotiate a settlement with the consumer’s creditors.
Meanwhile, consumers’ credit card debt grows due to late fees and accrued interest, and credit ratings fall due to non-payment. Attorney General Madigan notes that a majority of consumers drop out of these plans and end up having more debt, worse credit, and may also be sued by their creditors. The debt settlement company keeps the money it charged up front and its clients can end up filing bankruptcy.
New Law Limits Up-Front Debt Settlement Fees
The new Illinois law limits the up-front fees that debt settlement companies can charge to $50 and prohibits further payments unless debts are actually settled. Fees are capped at 15 percent of the savings realized from debt settlement. Debt settlement companies can no longer advise clients to stop paying creditors and are required to notify clients that creditors may not agree to reduce balances owed, and that debt settlement plans can negatively impact consumer credit scores.
Following in Illinois’ Footsteps
More states must take a cue from the Illinois law and take steps to shelter vulnerable consumers from scams. If you’re in trouble with debt, facing foreclosure, or both, please contact a certified credit counseling service and/or a HUD approved housing counselor. Legitimate consumer credit counseling and debt consolidation services can help you negotiate affordable payment terms while reducing or eliminating fees and finance charges on credit card debt.
(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 ...Recent reports of falling FICO credit scores is not surprising in light of high unemployment rates, stagnant real estate markets, and ongoing home foreclosures. Unfortunately, other factors can lower your credit scores even if you’re paying your bills on time, haven’t lost your job, and aren’t in foreclosure.
- Credit utilization ratio: You can calculate this number by dividing the amount of debt you owe by the amount of credit you have. If you owe $3000 between three cards that have a combined total credit line of $10,000, your credit utilization ratio is 30%. Financial advisors recommend keeping your balances at about one third of your available credit, or about 33%. Unfortunately, if credit card issuers cut your credit lines, your credit score can decrease.
- Credit card issuers cutting credit lines: The days of carrying a wallet full of credit cards with five-figure credit lines are gone. Credit card companies are reducing credit lines to limit their risk. In the example above, owing $3000 against $10,000 total credit lines would put you in good shape, but if your total credit line is reduced to $5000, owing $3000 would increase your credit utilization ratio to 66.6%, which is well over the recommended utilization level of 33% or less.
- Unemployment: As high unemployment rates linger, more consumers find it necessary to make minimum credit card payments and may also increase balances using credit cards for essential expenses. Missing payments can take a big bite out of your credit scores very quickly.
- Sluggish housing markets: This can cause problems for homeowners who need to sell their homes to relocate to a new job or for those who can no longer make payments. If you can’t sell your home, or your lender won’t approve a short sale, you may be forced into foreclosure. Contact a housing counselor for help to avoid foreclosure.
- Reduced income: Taking lower paying jobs while waiting for your next professional gig can help pay the bills, but if you fall short, using credit cards can seem like a temporary “bridge” to make ends meet. High interest rates can send credit card balances out of control.
- High interest rates: Although legislation designed to protect consumers is now law, credit card companies are responding by increasing interest rates to replace revenue lost when certain practices and fee assessments were outlawed. The complicated methods credit card companies use to calculate interest can cause interest owed to increase rapidly.
Eliminating credit card debt saves money and improves your financial security; develop your own debt repayment plan or get help from credit counseling and debt consolidation programs. Although your credit rating can decrease during a debt management program, you can increase your savings and eventually rebuild your credit by making mortgage, vehicle, and student loan payments on time.
(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 ...Seattle Residents Have Most Debt, Says Experian
If you live in Seattle, there is a good chance you have a lot of debt. That’s because the city has the highest average debt per consumer at $26,646, according to data from Experian. However, Seattle residents have few late payments and high credit scores.
Dallas claims the No. 2 spot with average debt of $26,599, followed by Denver ($26,428), Atlanta ($26,063), and Phoenix ($26,035). Experian ranked the 20 metropolitan areas with the highest consumer debt. Los Angeles was at the bottom of the list. Read the rest of this entry »
(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 ...Senator Mark Udall (D-Co) has introduced a bill that would greatly assist consumers in dealing with and improving their credit. The legislation, intended to amend the Fair Credit Reporting Act, would require credit bureaus to include credit scores with free annual credit reports. Under current law, consumers can request free copies of their credit reports from credit bureaus Equifax, Experian, and TransUnion annually, but must purchase their credit scores. From the standpoint of consumers, whose financial lives are highly impacted by credit scoring, this legislation is long overdue. Here are some reasons why credit scores are important along with tips for improving them.
Credit Card Debt Can Lower Your Credit Scores
Credit scores not only impact your ability to get credit, but they can also influence your chances for getting hired, renting or buying a home, and finding a good prices on insurance. Here are some things that are useful for boosting your credit scores:
- Paying down credit card debt: Too many of us carry credit card debt in excess of one third of our available credit. If your debt utilization ratio (amount of debt owed divided by your total credit lines) is more than 33%, developing a debt management plan is essential to improve your credit scores.
- Understanding and Comparing APR: The annual percentage rate (APR) for each of your credit cards displays on your monthly statements. The APR is the total of interest and other finance charges including penalty fees expressed as an annual percentage of your current balance. An APR can change from month to month, but paying down the highest APR debt first can help save on finance charges and pay off your debt faster.
- Getting Debt Help: If you have no will power or are concerned about successfully managing your credit card debt, contact non profit consumer credit counseling and debt consolidation services for help. These agencies can help evaluate your income and spending, develop a cash based budget that includes saving for emergencies, and negotiate affordable repayment terms with your creditors. If you agree to a repayment program, you are charged an administrative fee and asked to pay the agency a specified amount toward your debt each month. Your credit counseling agency deducts its fee and pays your creditors according to your repayment plan.
Credit Counseling and Your Credit: No Miracles Available
Anyone promising to “eliminate negative credit” or provide “overnight relief” is not providing legitimate debt management help. Credit counseling and debt consolidation programs cannot change negative credit entries that result from overdue accounts. Credit counseling services cannot guarantee that you’ll have good credit upon completing your plan, and they also cannot guarantee that you’ll qualify for new credit.
Debt Management: Don’t Let Temptation Sabotage Your Credit Scores
Consumers who are in debt due to impulsive spending are vulnerable to temptation after paying off credit card debt. For your financial peace of mind, please banish the phrase “just this once” from your vocabulary and don’t carry credit cards with you.
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
Cost of Bankruptcy Has Risen Since 2005 Reform
Understanding consumer debt: The good, the necessary, and the ...
- August 30, 2010–September 5, 2010
- August 23, 2010–August 29, 2010
- August 16, 2010–August 22, 2010
- August 9, 2010–August 15, 2010
- August 2, 2010–August 8, 2010
- July 26, 2010–August 1, 2010
- July 19, 2010–July 25, 2010
- July 12, 2010–July 18, 2010
- July 5, 2010–July 11, 2010
- June 28, 2010–July 4, 2010
- June 14, 2010–June 20, 2010
- June 7, 2010–June 13, 2010
- May 31, 2010–June 6, 2010
- May 24, 2010–May 30, 2010
- May 17, 2010–May 23, 2010
- May 10, 2010–May 16, 2010
- May 3, 2010–May 9, 2010
- April 26, 2010–May 2, 2010
- April 19, 2010–April 25, 2010
- April 12, 2010–April 18, 2010
- April 5, 2010–April 11, 2010
- March 29, 2010–April 4, 2010
- March 22, 2010–March 28, 2010
- March 15, 2010–March 21, 2010
- March 8, 2010–March 15, 2010
- March 1, 2010–March 7, 2010
- February 22, 2010–February 28, 2010
- February 15, 2010–February 21, 2010
- February 8, 2010–February 14, 2010
- February 1, 2010–February 7, 2010
- January 25, 2010–January 31, 2010
- January 18, 2010–January 24, 2010
- January 11, 2010–January 17, 2010
- January 4, 2010–January 10, 2010
- December 28, 2009–January 3, 2010
- December 21, 2009–December 27, 2009
- December 14, 2009–December 20, 2009
- December 7, 2009–December 13, 2009
- November 30, 2009–December 6, 2009
- November 23, 2009–November 29, 2009
- November 16, 2009–November 22, 2009
- November 9, 2009–November 15, 2009
- November 2, 2009–November 8, 2009
- October 26, 2009–November 1, 2009
- October 19, 2009–October 25, 2009
- October 12, 2009–October 18, 2009
- October 5, 2009–October 11, 2009
- September 28, 2009–October 4, 2009
- September 21, 2009–September 27, 2009
- September 14, 2009–September 20, 2009
- September 7, 2009–September 13, 2009
- August 31, 2009–September 6, 2009
- August 24, 2009–August 30, 2009
- August 17, 2009–August 23, 2009
- August 10, 2009–August 16, 2009
- August 3, 2009–August 9, 2009
- July 27, 2009–August 2, 2009
- July 20, 2009–July 26, 2009
- July 13, 2009–July 19, 2009
- July 6, 2009–July 12, 2009
- June 29, 2009–July 5, 2009
- June 22, 2009–June 28, 2009
- June 15, 2009–June 21, 2009
- June 8, 2009–June 14, 2009
- June 1, 2009–June 7, 2009
- May 25, 2009–May 31, 2009
- May 18, 2009–May 24, 2009
- May 11, 2009–May 17, 2009
- May 4, 2009–May 10, 2009
- April 27, 2009–May 3, 2009
- April 20, 2009–April 26, 2009
- April 13, 2009–April 19, 2009
- April 6, 2009–April 12, 2009
- March 30, 2009–April 5, 2009
- March 23, 2009–March 29, 2009
- March 16, 2009–March 22, 2009
- March 9, 2009–March 15, 2009
- March 2, 2009–March 9, 2009
- February 23, 2009–March 1, 2009
- February 16, 2009–February 22, 2009
- February 9, 2009–February 15, 2009
- February 2, 2009–February 8, 2009
- January 26, 2009–February 1, 2009
- January 19, 2009–January 25, 2009
- January 12, 2009–January 18, 2009
- January 5, 2009–January 11, 2009
- December 29, 2008–January 4, 2009
- December 29, 2008–January 4, 2009
- December 22, 2008–December 28, 2008
- December 15, 2008–December 21, 2008
- December 8, 2008–December 14, 2008
- December 1, 2008–December 7, 2008
- November 24, 2008–November 30, 2008
- November 17, 2008–November 23, 2008
- November 10, 2008–November 16, 2008
- November 3, 2008–November 9, 2008
- October 27, 2008–November 2, 2008
- October 20, 2008–October 26, 2008
- October 13, 2008–October 19, 2008
- October 6, 2008–October 12, 2008
- September 29, 2008–October 5, 2008
- September 22, 2008–September 28, 2008
- September 15, 2008–September 21, 2008
- September 8, 2008–September 14, 2008
- September 1, 2008–September 7, 2008
- August 25, 2008–August 31, 2008
- August 18, 2008–August 24, 2008
- August 11, 2008–August 17, 2008
- July 28, 2008–August 3, 2008
- July 21, 2008–July 27, 2008
- June 16, 2008–June 22, 2008
- June 2, 2008–June 8, 2008
- March 17, 2008–March 23, 2008
- November 12, 2007–November 18, 2007
- November 5, 2007–November 11, 2007
- October 29, 2007–November 4, 2007
- October 15, 2007–October 21, 2007
- September 17, 2007–September 23, 2007
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.
- Auto Loans (1)
- Consumer Credit Counseling (39)
- Credit Cards (19)
- Debt Advice (57)
- Debt Consolidation Options (31)
- Debt Consolidation Scams (8)
- Debt Management Options (27)
- Debt Settlement (16)
- DebtHelp.com (170)
- Economy & News (8)
- Helping Consumers (25)
- Managing Debt (28)
- Mortgage Fraud (1)
- Saving money in today's economy (17)
- Your Credit (9)
- You will recieve a reminder when we post a new article to the DebtHelp Blog.
Loading ...