Debt consolidation is an excellent remedy for people who have a significant amount of debt distributed on two or three plastics. Basically, it means moving all your balances onto a single less-costly plastic. Thus you will have only one payment rather than several ones to bother about. A lower APR will help you reduce your borrowing costs and speed the process of paying off your debt. Read about 3 main steps that you need to take in order to choose the right balance transfer credit card and make a profitable deal.

1. Find credit offers with balance transfers.

Consolidating your credit card debts onto a low-interest plastic can save you thousand dollars. The main goal is to choose the right credit card that comes with better terms and features than you already have. As new offers tend to appear quite often, it takes some time to find the plastic that suits you most. Take advantage of financial websites that carry a wide selection of different credit cards. They offer plastics arranged in easy-to-read charts, so you can analyze and compare the key features without any difficulties. Explore the list of balance transfer credit cards online and write down 2-3 plastics that match your financial needs and the way of life.

2. Understand all terms and conditions.

Financial experts advise reading the fine print to understand the terms and actual costs you need to pay. Many consumers focus solely on the interest rates and don't pay attention to such important features as balance transfer fees or annual fees. So find the following information for each plastic you wrote down:

• Introductory APR on balance transfers. Almost all credit companies have separate interest rates for balance transfers, purchases and cash advances. Make sure you know what APR you will pay on the transferred amount. Typically, lenders snag new customers with attractive zero or very low introductory rate.

• The length of the introductory period. Unfortunately, introductory rate does not last for the whole life of your plastic. Traditional duration is 6-15 months.
• Balance transfer fee. Nowadays nearly all credit companies impose a balance transfer fee. It can be a flat rate, for example $50, or a percentage of the amount you will transfer - from 1% to 3%. The first variant can be more beneficial if you have a heavy balance.

• Regular interest rate on balance transfers. It is the APR you will need to pay after the introductory period is over.
• Annual fee. Typically, balance transfer credit cards come with low or no annual fee. If you need to pay for the annual maintenance of your plastic, take this dollar amount into consideration.
• Credit card limit. Make sure that your debt will be transferred fully. Otherwise, you can end up having two accounts instead of one.

3. Make a Decision

Now it's time to compare your current credit cards vs. new ones. How much can you save if you consolidate your debts? Calculate your borrowing costs for plastics where you have balance and for plastics that you are considering for a balance transfer. Write down the results you get for each plastic. Now look through the list of candidate credit cards and identify which one will save you the most!

Keep in mind that debt consolidation doesn't reduce your balance; it just helps you save on a lower APR. So live within your means and don't spend more than you earn!

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Comments

Moira, 12:21 AM, September 22, 2008
Hmmmm.. I didn't think about debt consolidation before....

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