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Consolidate Credit Cards

People who are in debt (credit card debt) often hear the advice ‘consolidate credit card debt’. So, what does ‘consolidate credit card debt’ mean? Well, quite simply, ‘consolidating credit card debt’ means combining various credit card debts into one (or two) credit cards. This consolidation can be done either through a low-interest bank loan or by transferring the balance to a new credit card (i.e. transferring the amount you owe on one or more credit cards to a new credit card).

So, what should you do when you want to consolidate credit cards? Well, the key is to look at the APR or Annual Percentage Rate. No matter what method you use to consolidate credit cards, the APR will always be the key; in fact, you could argue that it is the only criteria to look for. So, if you are using a bank loan to consolidate credit card debt, the interest rate on the bank loan should be lower than the APR of the credit card you are consolidating. Likewise, if you are switching to another credit card, you must make sure that the APR on the new credit card is lower than the credit card you are consolidating your debt with. However, there is one thing you must be aware of when making a plan to consolidate credit card debt. Most credit card providers advertise APRs that are short-term APRs designed to lure you into consolidating your credit card debt with them. By short-term rates we mean that they only apply for an initial period of less than 12 months or some other period, after which the interest rate rises. When you consolidate credit card debt with these credit card providers, they will offer you a lower (even 0%) APR for the initial 6-12 months; and a much higher APR thereafter. You should check what this higher APR is. Your decision to consolidate credit card debt will only come to fruition if the new APR is lower or equal to the APR of your current credit card. You can check with your current credit card provider to see if he can lower your APR (it would be very easy for you to do so).

Before you proceed to consolidate credit card debt, you should understand that consolidating credit card debt will only be beneficial if you commit to adopting and following a disciplined approach to credit card use, i.e., controlled spending and regular/timely payment of credit card dues.