Three Reasons to Consider Credit Card Consolidation

For the first time in several years, the uncertainty of the economy during this recession has caused Americans to begin saving money again. Some are simply stockpiling cash in case things take another turn for the worse. Others are cutting back on personal spending and paying down debt instead, trying to strengthen themselves financially. Just a few years ago, the national savings rate was negative as the average American was spending more than he or she was earning. This spending led to high balances on credit cards, many of which carry high interest rates.

One of the tools that many people effectively use to manage credit card debt is credit card consolidation. The average American has about 4 credit cards, and one out of every 7 Americans has more than 10 credit cards. Some people have the income and discipline to pay off their balances each month, but many consumers carry balances on their various cards, making payments as bills roll in one after another. The average borrower with at least one credit card carries more than $10,000 in credit card debt. Here are three reasons why you should consider consolidation of your credit card debt:

- It’s Simple: Having multiple lines of credit open means opening several bills each month, tracking information like due dates and minimum payments, and trying to determine which credit balances you should be paying down first. It’s not impossible to manage a debt situation like this, but wouldn’t it be much easier to have one bill for all of your credit card debt each month? Part of the reason that getting out of debt can be difficult is that it’s confusing to keep it all straight. With a single consolidated debt position, you can focus on reducing that debt much more effectively.

- It’s Flexible: There are many ways that you can consolidate credit card debt. A few years ago, the Home Equity Line of Credit (HELOC) was the most popular option. HELOC’s are a little more difficult to obtain now, but if you have equity in your home and a solid credit history, this is still an option that carries a very reasonable interest rate, and the interest you pay would be tax deductible. You can also use your credit card with the lowest overall interest rate and transfer your higher-interest debt to that card. Another option is to ask your bank for a personal loan or signature loan–with good credit, this may give you a lower interest rate and allow you to pay more to principal.

- It’s Smart: Simplifying your financial life is always an attractive option, and if you can carry most or all of your debt in one place with a manageable interest rate, you’ll be on the right track to paying off that debt. One consolidated loan means you can allow your payment amount to vary based on your income and circumstances. Having a larger balance with creditors will also give you a stronger position with lenders to negotiate for a lower interest rate. Finally, you’ll feel a greater sense of accomplishment as you see your debt picture more clearly and face your debt head on, paying it down month after month.