ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Benefits of Consolidating Your Credit Card Debt

Updated on September 8, 2018

Why bother with debt consolidation? Why not just pay off your debts one by one, or just make payments on all of them individually?

Aside from crunching all your debt into one easy monthly payment, debt consolidation can speed up repayment by lowering your overall interest rate. Plus, clearing the debt on all those accounts can actually help your credit rating, even if you haven't reduced the actual amount of your debt.

Consolidating your debt cuts the number of necessary payments on that debt to one. This at least minimizes the chance you forget to pay one or more of several credit card bills. Having all your debt under one debt account instead of several vastly decreases the chances of a costly late payment (provided you make your payments on time of course).

Debt consolidation also makes it easy to keep track of where you stand with your total debt. Instead of monitoring several different balances and figuring out how this interest rate or that interest rate impacts your debt, your can easily monitor a consolidated debt load under one balance and one interest rate.

And that interest rate is usually lower than it was on those previous balances. Chances are likely that if you're even considering debt consolidation in the first place, most of your credit accounts charge relatively high interest rates. Even if a consolidated rate isn't super low, an 8-10% rate (even a 10-15% rate in some cases) could be an improvement over the rates the other accounts are charging for their respective portions of your debt. A reduced interest rate increases the amount of each monthly payment that goes toward reducing your principal balance and getting you closer to paying off the debt.

Doesn't it cost money to transfer a credit card balance?

Yes, your consolidated account gets assessed a balance transfer charge (typically 3% of the debt assumed) whenever you transfer debt to the account. But if the consolidated interest rate is a big enough savings over the previous rate, it's often worth adding the fee to the consolidated debt.

The act of transferring the balances to a consolidated account alone can help your credit. Every time you transfer a complete balance, the consolidating bank assumes the debt while paying off that balance on the previous account. The bank holding that old account sees the payment a complete payoff of the balance.

Aren't you just taking an existing debt and just moving it somewhere else?

Yes, you only took your credit card debt and put it somewhere else. But from the original bank's point of view, you paid the account balance off, improving your standing with that bank. They may reward you by raising the card's credit limit. Sure, you don't have to use the card again (maybe you already cut it up). But:

  • The credit bureau will see an improved usage ratio, which improves your credit score. The creation of a new credit account may or may not increase the amount of available credit you have on record (depending on whether or not the consolidated account is another credit card, or a personal loan). But the clearance of the balance on the old account means you go from using a portion of that balance to using none of it.
  • If that bank of that old account ever offers a low APR balance transfer for the account, you could use that account to re-consolidate debt if need be... in turn clearing the balance off of *another* account, further helping your standing and credit record.

In Conclusion


Credit card consolidation isn't necessarily a lateral move for debt. Consolidation simplifies the repayment process and usually reduces the amount of interest you pay, speeding up repayment. Plus the transfer process reflects well on you with the banks of your previous accounts, which can lead to better rates, higher credit limits and even special offers from creditors in the future.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)