Debt Consolidation: Is Combining Credit Cards Right for You?

Consolidating debt is at the forefront of many people's minds these days. Debt levels seem to be at an all-time high for many consumers. With the easy standards that it takes to get a credit card, many people find themselves in trouble very quickly. You can rack up several thousand dollars on multiple credit cards before you even realize what you are doing. With this kind of freedom, many people now have a big problem on their hands. One popular method for servicing debt is to consolidate all of your debt onto one credit card. Many people try this, but you may be wondering if it is a good idea. Here are a few things to consider before you go through with it. 

How it Works

The process of consolidating your debt onto one credit card is pretty simple. First of all, you find a credit card that has a large limit and a promotional zero percent interest rate. You then set up a balance transfer between that card and your other credit cards or accounts. If you have another type of account, you simply use the new credit card to payoff the account. Then all of your debt is on the new credit card in one central location.

Benefits

• One payment- One of the big benefits of this strategy is that you only have to worry about one payment. When you can put everything in one place, it becomes much easier to focus on your debt. You do not have to worry about making five different minimum payments. You can simply put all the money that you have each month onto one card. You will not have to worry about if you are paying off the right account. When you focus on eliminating your debt, you can get rid of it easier and faster.
• Eliminate interest- When you put all of your debt from high interest credit cards onto a card with no interest, you are going to save some money. Doing this is like getting an interest free loan for a certain period of time. 

Should You Do it?

Going with this strategy can help you in a few different ways. However, it can be harmful if you do not do it correctly. Many people go through the process to transfer all of these balances, but do not put forth a plan of action to retire the debt. Let's say that you consolidate three credit cards onto one card and your new balance is about $10,000. Most of the time, you will get 12 months of no interest on the card. Once that 12 months is up, you are charged the full amount on the balance. Most people will not have enough money to make much of a dent in the $10,000 over the course of a year. Then you have to start paying high interest on the entire amount. While it can be beneficial, you need to make sure that you use some caution.