Debt Consolidation

How Can I Use Credit Cards For Debt Consolidation?

Debt consolidation Credit Cards Are Essentially Balance transfer credit cards which come in two types. The first type is where a zero percent interest rate is applied to a 0% credit card for a set period of time, usually 6 months. The second type is where a low interest rate is applied to the credit card for the life of the balance transfer.

Who Needs To Use Credit Cards To Consolidate Their Debts?

Anybody who has outstanding balances on other credit cards, loans, overdrafts or other finance may find it beneficial to consolidate their debts. Debt consolidation using credit cards can be a good way to consolidate your debts, providing you are organised, to do this you would use a balance transfer credit card.

By transferring outstanding debt including overdrafts, loans, other credit cards and store cards etc at 0% interest it means that you may be able to pay your debt off quicker. The reason for this is that your monthly payment is being used to reduce the outstanding balance of your debt rather than just paying off interest.

If instead of a 0% credit card you opt for a low interest balance transfer credit cards, some of your monthly payment will still be taken in interest, but the amount will normally be significantly less than the normal interest rate.

Why Use Credit Cards For Debt Consolidation?

If you have outstanding debts on which you are paying interest then consolidating your debts on to a 0% credit card may be the solution. Often (especially on credit cards ) the biggest part of your monthly credit card payment is just paying off the interest. By transferring your outstanding debts to a zero percent interest credit card you will be paying no interest for a given period of time thus reducing your balance faster.

Taking Advantage Of Credit Cards To Consolidate Your Debt

The important thing to remember when using a balance transfer credit card is that if you have taken it out to consolidate your loans or other debts, then do not spend on it, just use it to give you a period of months interest free or at a lower rate.

Remember that any purchases you make will usually be charged at the normal interest rate so it is best to avoid making any purchases on the card at all if it is for debt consolidation. This is the same for both the fixed term 0% interest credit cards, and the low balance transfer for life credit cards.

Do not miss payments, as some credit cards will revert you to their normal rate if you do. If you keep on top of your payments and your balances you may be pleasantly surprised at the results.

Be aware also, that many balance transfer credit cards may charge you a fee for the initial balance transfer, the key here is always read the terms and conditions carefully.

Can I Continue Paying Zero Percent Interest Or A Low APR?

Yes, once you have consolidated your debts onto a 0% or low APR Credit card you can always transfer the balance to another one before the introductory low interest rate is finished, and this is a good way to continue paying 0% interest. If using 0% credit cards, always make a note of when when the interest free period is due to end.

Then about a month before the end date start looking for another 0% balance transfer credit card to apply for. Ensure that you set up an account with the new credit card company, and transfer the balance to the new credit card before the interest free period finishes on the old card.

What Should I Do With The Old Credit Card I Used For Debt Consolidation?

Once the balance is transferred to the new credit card, and you have confirmed that the balance on your previous card is zero, phone up the company's customer services and close your account with them.

This is a very useful step to remember and it serves two purposes. Firstly, having too much credit available to you in the form of unused but still open credit cards can adversely effect the decision as to whether the new lender will offer you the card. Secondly once your account is closed with the original lender it gives you the opportunity to re-apply for a 0% credit card with them again at a later date.