Trying to pay off all your credit card bills can feel overwhelming, especially if your interest rate is high or you’re carrying a large balance on multiple cards. If you’re struggling to make monthly payments on your cards, consolidating your debt could be the best solution for you.
Consolidating means that all of your debts, whether credit card bills or loan payments, are combined into a single monthly payment. It could be a great solution if you have a number of credit card accounts or loans and want to simplify or reduce your payments.
Read on to find out why consolidating your credit card debt could work for you and familiarize yourself with the benefits you’ll receive if you do it.
Common benefits of credit card consolidation
Consolidating credit card debt can provide some common benefits, such as:
- Reduced interest rate: If you have a high-interest credit card, debt consolidation may lower your interest rate and help you save money. A lower interest rate means more of your monthly payment goes toward the principal balance, which helps you pay off debt faster.
- Tax-deductible interest: Some equity loan and debt consolidation loan interest, for example, is tax deductible, so make sure you check with an accountant before you make a decision.
- One monthly payment: Instead of having multiple payments due at different times, consolidation may help simplify your budget by enabling you to have all of your loans paid off at the same time each month. Borrowers with multiple types of debt – credit cards, student loans, medical bills and more – can use this strategy to combine those loans into a single monthly payment at what will hopefully be a lower interest rate.
There are different ways to consolidate debt. Here are the advantages and disadvantages of a few of the most popular methods:
Use a balance transfer card
Balance transfer cards, which let you move high-interest debt to a new low-rate account, should be one of the first options you explore when trying to consolidate debt.
What is a balance transfer card?
A balance transfer card is essentially a revolving line of credit – just like traditional credit cards. But these cards usually come with a special low interest rate (often 0% APR) for a limited time period, specifically for transferring debt.
The introductory rate can range from 0% for six months to 0% for 21 months or more, depending on the card. During that period, you’ll pay no interest on your existing balances as long as you make at least the minimum monthly payment on time. Once this introductory period ends, however, you’…….