Credit Card Debt Consolidation

Credit card is known as plastic money that provides you with a short-term loan. ISO 7810 specifies the standard size of a credit card. Many banks and financial institutions issue credit cards. These cards can be purchased on the Internet, by filling the online application forms.

Credit Card Tips

Before purchasing a credit card, understand the features and policies of the credit card company. You can compare the features of various companies before settling for one.

Think how and when you plan to use the credit card before purchasing one. For instance, if you are planning to clear the entire amount of your monthly credit card bill then it is wise to choose a card that offers a longer grace period and has no annual fee.

If ever you face a problem while using the credit card of a particular company, call their customer care center immediately and file a complain.

While purchasing expensive goods using credit cards compare the annual rate of interest with the cost of the good. You can ask the credit card company to provide you with EMI (easy monthly instalment) facility in such cases.

It may happen that balance of the previous month is carried over to the next month. You would have to pay an interest for the amount that is carried over to the next month. In such cases, choose a credit card that offers a lower annual interest (Annual Percentage Rate or APR).

At the time of an emergency, if you plan to use the credit card to get cash advance, check out for a card with a low APR. The reason is many of the credit cards have a higher APR for cash advances than for purchases.

What is Annual Percentage Rate

APR or the Annual Percentage Rate is the annual rate of interest the owner of the credit card would have to pay when he carries forward the balance from one month to another, uses cash advance or gets a balance transfer from one credit card to another card. A point noteworthy to mention here is that a single credit card can have multiple APRs. Annual Percentage Rate would vary for late payments and introductory offer. The Annual Percentage Rate is fixed or variable.

In fixed APR, the interest rate does not change very often and the credit card company would notify the card owner whenever, there is a change in the fixed rates. Whereas, variable APR is when the interest rate is likely to change very often. You need to be clear about the type of APR, you would opt for while choosing a credit card.

Grace Period - In Brief

Prior to purchasing a credit card, you must be aware of the grace period the credit card company offers. The period from the date of purchase till the payment date is known as the 'grace period'. The minimum grace period offered by many of the credit card companies is 25-30 days. If the amount shown in the billing statement is totally cleared, then there is no extra financial charge. Keep in mind, the grace period would apply only for the new purchases made.

However, if you happen to pay only the minimum amount due and carry the balance to the next month, then you would have to pay a minimum financial charge (interest). In such cases, there may not be any grace period for the new purchases that you make in the next month. Instead, you would have to clear the balance carried over plus the amount for the new purchases; else the interest rate would be imposed on the total amount (balance of the preceding month + the current month’s purchases). While applying for a credit card, get the information regarding the method of computing monthly balance.

What is Credit Card Debt

One of the major problems faced by many of the world economies is the credit card debt. Studies show that people using credit cards tend to spend 12 to 18% more than the ones who purchase using money. The financial experts believe when you use cash to pay, you can actually feel the money slipping through your fingers. It creates a hole in your pocket. While using your credit card to pay, you have no such emotional feeling. Hence, they suggest using of debit cards instead of a credit card.

A credit card debt arises when you purchase goods and services using the credit card and do not pay the full amount during the grace period. When the debt accumulates, the rate of interest charged is also high. In such cases, the penalty for late payment would also be high. The late payment would be reported to the credit rating agencies, which will affect your credit scores.

The penalty for the late payment, cash advance and balance transfer would increase the debt amount. When the consumer uses the credit to the maximum limit of the credit card he is fully in debt to the credit card company. If it is the case with all his credit cards, then the only way out of credit card debt is by credit card debt consolidation.

How to Consolidate Credit Card Debt

One of the ways to come out credit card debts is through credit card debt consolidation. You can either seek professional help or do it yourself. Here are a few tips to consolidate and reduce your credit card debt.

Stop using credit cards - First and the foremost thing to do is to stop using your credit cards. Work out a plan to reduce your expenses. Cut down on the luxuries. When you are planning to consolidate the credit card debt, it is best to slash certain unnecessary expenses such as eating out and paying late fee every morning.

Balance transfer - If you have many credit cards find the total amount you owe to each company. While applying for balance transfer, ensure you are not buying an introductory offer with low rate of interest. The reason is that after the offer period the rate of annual interest would skyrocket. If you have a huge debt amount, it is better to use some part of your savings to clear the debt than to go for a balance transfer.

Debt consolidation loans - Many private financial institutions and banks offer debt consolidation loans to people who are in credit card debts. Apply for the same to clear the credit card debts.

Try making extra payments - The debt period is prolonged for people who pay only minimum amount due on their credit card statements. The debt could be reduced if extra amount is put down as credit card payments. This is possible if you cut down on unnecessary expenses.

The other option is you can negotiate with your credit card company to bring down the rate of interest. This is possible if you are recovering from any health problems or an accident. Never hesitate to meet a debt counselor for debt management and debt counseling. He would be the right person to help you reduce and finally help clear your credit card debts.

Benefits of Credit Card Consolidation

Financial institutions introduce programs to consolidate credit card debts on multiple cards. Listed below are some of the benefits of credit card consolidation.

The financial company consolidates all the credit card debts; so you need to make only one monthly payment to the concerned financial company. The payment date can be chosen according to your convenience.

The rate of interest on the debt would be reduced substantially and you would have to pay a stipulated monthly amount. This amount includes both the principal and the interest.

When the account is delinquent, the creditors usually ask for immediate full payment. The debt-consolidating firm takes the responsibility for maintaining your current account by 're-aging' the account. This means your account would be active and current as long as you make payments through the debt-consolidating firm. It will help in rebuilding your credit scores.

Credit card debt consolidation programs are designed by many banks and private financial institutions to help people who need financial aid. By using these programs, you can eliminate your rising credit card debts.