Is consolidating your multiple credit card debts the best way to get rid of that burden once and for all? If that is so, which is the best way to actually do that? These questions are popping up more and more often as more people are having real struggles with their credit card financial obligations. If we say that credit card debt is the biggest financial problem for many people in the United States, we would certainly not be far from the truth. There are many studies that showed that the average household in the United States of America is carrying around $16,000 in unpaid credit card balances. The reality is that if you are an adult American and you are not carrying much debt, you are actually part of the minority.
What causes so many people to be in such an uncomfortable financial situation?
The truth is that we live in times where the state of the economic environment is rather unstable, where the living costs are always on the rise, while the level of income remains fairly the same. And for those who find it particularly difficult to cope with the constant financial changes around them, it can be quite easy to fall into debt. And credit card debt, being the most popular type of financial obligation out there, is often the thing that people are forced to fight with.
Is there a way to avoid it?
There are many ways that a person can avoid falling into credit card debt. However, sometimes, even the most prepared ones are unable to overcome the financial problems that they encounter. If we look at all the people who are having difficulty with even paying their regular monthly bills, we would easily see why carrying multiple debts, including credit card balances and other types of debt, does not really come as a surprise. As we all know, there is more to life than just paying your electricity bill and buying food. When even these necessity expenses become a problem, it is extremely hard to sustain a free of debt lifestyle. However, once you are in such situation, reviewing the reasons that got you there can only prepare you will not be enough to get you out of the troubles that you are in. In order to do that, you would need to take some actions towards paying off all the money that you owe and regaining your financial stability so that you can, once again, live a life without the constant stress of repaying multiple credit card bills every month.
So what is the best way to get rid of all that debt?
The best way for dealing with multiple financial obligations is ultimately determined by the unique financial situation that you are in. That means that the best solutions to your problems may be quite different from the best solutions to the problems of the person standing next to you. With that in mind, there is a method for dealing with more than a single debt, a method that is usually a go-to option for many people who are struggling with multiple financial obligations and that financial method for dealing with such issues is called debt consolidation.
What is credit card debt consolidation?
Credit card debt consolidation, much like any type of debt consolidation, involves the combining of your multiple unpaid balances into just a single monthly payment. It is one of the most popular and effective ways of dealing with a number of financial obligations, and there are many benefits that this method offers that back up that statement. The general purpose a credit card financial obligations consolidation is to lower the overall interest rate on all of your credit card balances, reduce the amount of the monthly payment that you have to make each month and in some cases, to reduce the overall amount of money that you owe to all of your creditors. Here is how each of these benefits can impact your repayment process and your chances of successfully getting rid of what you owe:
Having a single monthly payment
Transforming your multiple bills into a single monthly payment is always going to be one of the main features of the debt consolidation service, as it really is one of the most beneficial tools that you can take advantage of when you are repaying multiple debts. When you are struggling with multiple bills on multiple different accounts, it is hard enough to come up with the money for these payments. When you have to keep track of each one and calculate your budget, things can get quite overwhelming and stressful. When you shuffle all of these bills into a single payment, you will keep track of your debt repayment a lot more easy, which will take off some of that stress that is on your shoulders and will give you some free time to breathe and relax. Having a single monthly payment will also enable you to make your payments on time a lot easier, which will ultimately allow you to avoid any late payment fees.
Lowering the interest rate on your financial obligations
This is, of course, probably the feature that everybody is looking for when they are considering a credit card debt consolidation. By lowering the interest rate on your credit card balances, you will significantly improve your chances of paying off the money that you owe and you would also be able to do it a lot easier and faster.
Reduced monthly payment
When you are going through difficult financial times, being able to save up any amount of money can be crucial. So having a reduced monthly payment can give free up a much-needed room in your budget.
What is the best way to consolidate credit card debt?
As mentioned above, your specific financial situation will determine which the best way for dealing with your multiple debts is going to be. Generally, there are three main ways of consolidating credit card debt:
Consolidating credit card balances with a debt consolidation loan
Debt consolidation loans are probably the most popular way of consolidating any type of debt, and credit card debts do not make an exception. With a debt consolidation loan, you are throwing all of your credit card balances into a brand new personal debt consolidation loan. With that loan, you get new loan terms, which means a lower interest rate, or at least that is usually the goal.
Credit card balance transfers
When we are talking about credit card debt, transferring the balances of your credit cards onto a single, brand new credit card is usually the go-to option for consolidating for many people out there. The idea here is to transfer all of your existing credit card debts onto a brand new credit card with a significantly lower interest rate, usually a 0% interest rate credit card. However, you need to keep in mind that the interest rate on your new card will not remain at 0% for the whole repayment period. It is very important to find out how long will this 0% interest rate period last, and what the interest rate is going to be afterward.
Debt management plans
That is another service for consolidating debt which does not involve taking out a loan or a balance transfer. With debt management plans, you are paying a debt management organization to negotiate better repayment terms with all of your creditors. You pay a single payment to that organization each month, after which, the agency splits that payment among all of your creditors. The goal here is the same as the other consolidation methods – to lower your interest rate, monthly payment, and with this one, you may also be able to reduce the overall debt amount that you have.