Become debt-free with credit card debt consolidationBalance transfers can help consolidate debtBy Ben Woolsey and Emily Starbuck Gerson
Credit card debt can put a debilitating drag on your personal finances and limit your day-to-day money options. If you have a large outstanding credit card balance, now might be the time to consider your credit card debt consolidation options.
Becoming debt free is certainly a goal that can be accomplished, even for those with limited income. Credit card debt is difficult to eliminate, however, unless you have a plan and a healthy dose of self-discipline.
First step: Track spending
Marc Diana is CEO of LeadPoint, a leads exchange marketplace. He previously worked for LowerMyBills.com, and says that the best way to get out of debt is to make sure that cash coming in exceeds cash going out. "This may sound simple, but clearly it isn't," Diana says. "Consumers should create a detailed budget and get in the habit of tracking details, especially expenses, on a daily basis."
"In addition, where possible, consumers should avoid debt-increasing products like credit card debts," he says. "Not keeping a credit card in your wallet will ensure you don't have the urge to buy something you can't afford."
After keeping track of expenses, consumers are often amazed how much money they waste each month on nonessential items such as dry cleaning, restaurant meals and expensive coffee. Many can painlessly trim over $100 per month from their household expenditures and apply this money to the outstanding debt on their credit cards.
Debt consolidation options
Credit card debt consolidation options are numerous for those with above-average credit. Consumers can take out personal loans, or work with a professional organization that can put them on a no loan consolidation plan. But there is another option: "Consolidating all your credit card debt onto one may make sense for several reasons," Diana says. "First, it allows consumers to more easily track their spending. In addition, this approach will ensure you are paying the lowest possible interest rate. Consumers will need to carefully monitor interest rate changes on credit cards and be willing to move balances to find a better deal."
Credit card issuers aggressively compete for new balances because this is where they make most of their income. They are willing to offer a low interest rate or even 0 percent introductory annual percentage rate on balance transfers if you move your business to their card product. (These 0 percent offers may be phased out over time as issuers wrestle with the rising cost of credit in the wake of the economic crisis and recent credit card industry reforms, but that hasn't happened yet.) Eventually the low rate or 0 percent APR will expire, but in the meantime a smart credit card customer will use that free period to pay off the balance. That's where the self-discipline is required; it's very tempting to start spending again when the burden of high finance charges is temporarily removed. But this is the time to chop away at the outstanding balance and embark on the road to becoming debt free by leveraging interest-free credit card consolidation.
When you pay off credit card debt, you can begin to explore other types of credit card products that are available to the disciplined consumer, such as a cash back credit card that actually pays you to do your everyday shopping.
See related: Balance transfer calculator
Published: December 30, 2008
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Balance transfer basics
