We now live in a consumer society driven by easy short-term unsecured debt. Most of this is meant in the form of credit card debt, with nearly all of us having to-hand more than one credit card.
Credit card debt is expensive to fund, interest rates are high, and there is nearly always some form of credit usage fee in our account statement. To solve this, below we look at 5 reasons why you might want to use the option to consolidate your credit card debt:
Because of the annual fee charges
A common trend among credit card issuers over recent years has been to ask members to pay an annual usage fee for the credit card. In certain cases this annual fee can be expensive-especially where you may make use of more than one credit card and are faced with having to pay several annual membership fees.
However, credit card issuers know they’re in contest to get new customers and so some of them are offering use of their credit card without you needing to pay any annual membership fee and not asking member to pay an annual membership fee is a second worthy reason why you may wont to consolidate your credit card debt.
however, keep in mind that if you consolidate credit card debt because of this issue, make sure that the credit card issuer has not accounted for this by adding other hidden fees or a higher rate of interest on the card, else you may find that the overall cost of funding the debt adds up to more per annum than if you just pay the annual fee with your current credit card issuer.
Because of bad credit rating
Those of us who allow our existing credit card debt concerns to get on top of us, to the extent where we are no longer in a position to make the monthly minimum repayments, have sadly just come across the fourth reason why you may want to consolidate your credit card debt because you now have bad credit rating.
Because of high interest rate
The major reason why most people consider swapping credit cards and consolidating all of their outstanding credit card debt into one card is because the interest rates on their existing credit card are just too high.
As you may be aware, not all credit card issuers offer the same interest rate. Moreover, in this highly competitive market, some credit card issuers now offer significantly lower rates of interest than some of the other more.
So, if you think that it is going to be financially beneficial to you to consolidate all your existing outstanding credit card debt into credit card debt that is offering a lower interest rate, which will equate in significant savings. This may well be a very sensible option to take.
Because they’re paying me to do it
The last reason why you may want to consolidate your credit card debt into one debt is because the credit card issuer is paying you to do it. Believe it or not, the credit card industry has now become so competitive that issuers are fighting among themselves to get people to sign up to their card.
Here, when the card issuer knows you have an existing credit, they’ll sometimes ask you to transfer the balance of your outstanding existing credit card debt to them, in return for which they all reduce some of the debt from your outstanding balance. Be careful though, those warning signs regarding interest rate and fees still apply.
Consolidating the credit card debt as personal loan
It is a gloomy fact of life that many of us do not know how to budget our spending on our credit cards. We see the limitation on our cards and seem to think that we have to spend all of this money in the next 24 hours; otherwise they may take the card away from us! We then spend the next 4 hours trying to pay back all the debt we just accumulated. All of this stress is then compounded by the fact that we have to make, at minimum monthly repayment to the credit card company.
To avoid this, and to try and find a way to source our debt at a lower cost many of us turn to the option of consolidating all of our outstanding credit card debt as a personal loan, which we then pay back monthly.
Though both of these debts are comparable in nature, i.e. unsecured, the personal loan method is much cheaper than the credit card debt. So, if you have credit card debt outstanding that you believe will take you more than 1 year to pay, the time may well have come to consider the third reason why it may be more beneficial to consolidate your credit card debt as a personal loan.