Consolidate Credit Card Debt?
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People who are in debt (credit card debt)
often get to hear this advice ‘Consolidate
credit card debt’. So, what does that
‘Consolidate credit card debt’ mean? Well,
pretty simply, ‘Consolidate credit card debt’
means consolidating the debt on various
credit cards into one (or two) credit card. This
consolidation can be done either through a
low interest bank loan or by transferring
balance to a new credit card (i.e. transferring
the amount you owe, on one or more credit
card, to a new credit card(s)).
So what should you do when you are looking
to consolidate credit cards? Well, the key
thing to look for is the APR or the annual
percentage rate. Whatever method you adopt
to consolidate credit cards, APR will always
be the key; in fact, you could say that it is the
sole criteria to look for. So, if you use a bank
loan to consolidate credit card debt, the
interest rate on the bank loan should be lower
than the APR of the credit cards whose debt
you are consolidating. Similarly, if you are
moving to another credit card, you must make
sure that the APR of the new credit card is
lesser than the credit cards whose debt you
are consolidating. However, there is a catch
that you must be aware of when laying a plan
to consolidate credit card debt. The APR rates
advertised by most credit card suppliers are
the short term APR rates which are meant to
lure you to consolidate credit card debt with
them. By short term we mean APR rates that
will applicable only for an initial period of
less than 12 months or some other period
after which the APR rates increase. When you
go on to consolidate credit card debt with
these credit card suppliers, they will offer you
a lower (even 0%) APR for the first 6-12
months; and a much higher APR after that.
You should check what this higher APR rate
is. Your decision to consolidate credit card
debt will be fruitful only if the new APR rate
is lower than or equal to the APR on your
current credit card.