Credit cards can multiply as you receive tempting introductory offers or open new accounts to accommodate more purchases. Suddenly it seems like you’ve got bills due every week and the balances never go down. You can regain control of your finances by consolidating your credit card balances and making a concerted effort to pay them off. Consolidation will benefit your personal finances in several different ways.
Lower Interest
Credit card consolidation can slash your interest rates, according to Lower My Bills, a website run by the Experian Credit bureau. You are most likely paying several different rates if you have multiple credit cards. Some of those rates might be high, which means more of your payment is going toward the interest instead of the principle amount. Home equity loans, which are a popular means of credit card consolidation, usually have competitive interest rates because you are using your house to guarantee the loan. You will pay the same interest rate on the entire balance once you pay off the credit cards with the loan money. You may also consolidate your credit cards on one account with a low rate if the company will give you a credit limit that allows you to transfer all of your balances. Lower My Bills states you may even find a zero percent introductory rate, although that will be temporary.
Single Due Date
You must make payments to several accounts that often have different due dates when you’re juggling multiple credit cards. You only have one payment date when you consolidate them onto one card or through a home equity loan. This decreases the change of making a late payment because you only have one date to remember. You may even be able to set up an automatic payment that comes out of your bank account on the specified date so you don’t have to send it manually and worry that it arrives on time.
Budgeting
You can decide on a set amount to pay on your consolidated debt each month and work it into your budget. Then you can put a moratorium on using the credit cards so you don’t run up additional bills. This will allow you to get your debt paid off within a set amount of time. Leslie McFadden of Bankrate warns not to close the credit card accounts because it may harm your credit score. Clark Howard, consumer finance expert and radio host, advises using them twice a year. Buy something inexpensive and pay it off as soon as you get the bill so you don’t run up additional balances.
Higher Credit Score
Consolidating your credit cards will help you raise your credit score if you were occasionally missing payments when you were dealing with several accounts. FICO, a major credit score provider, explains that on-time payments make up more than a third of your total score. Each on-time payment on your consolidated balance will help to bring it up.
About this Author
Based in Kissimmee, Fla., Barb Nefer is a freelance writer with more than 20 years’ experience. She is also a mental health counselor and travel agency owner. Her work has appeared in such magazines as “The Writer,” “Animal Wellness,” “SuperVision,” “Bird Talk,” “SpeciaLiving” and “Twins.”
