What does consolidating mean and how can it help you financially?

Consolidating, also known as balance transfer, means combining several outstanding credit card debts into one. By doing this, you effectively wipe out the debt to all your current credit card providers by paying them off with your new credit card.

Now, of course you still owe the money, but the debt is owed to only one credit card provider.

Even if your credit is marginal, there are plenty of credit card providers competing for your business and who will offer to consolidate your debt. Shop around to see who will give you the best deal.

Usually credit card suppliers will offer an incentive by giving you an introductory low or even zero interest rate for a given period of 3 to 6 months or longer. Here is where you can save money by actually not paying any interest on your current debts. All the payments you make during this period will go directly to reducing the total amount owed.

The things you need to be aware of when consolidating to one credit card are the initial APR (annual percentage rate), the length of time of this introductory rate and finally, the standard rate you will be charged once the initial low rate period has expired.

By taking advantage of a low or zero % interest rate and paying the same amount you would have normally paid to all your previous accounts, you will have saved all that interest and therefore reduced your combined credit card debt. This in turn means that once the standard interest rate kicks in, your remaining balance will be lower and your total monthly required payment will be considerably less than before.

Now that you have taken steps to reduce your balance owed, you should take further action to see that you will get out of debt as soon as possible. Always pay your new consolidated credit card bill on time. Make your payments a little more than the minimum bill to reduce the interest on subsequent payments because everything helps. Most important, whenever possible, use cash to pay for purchases and checks to pay bills instead of your credit card.

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