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Credit Card Consolidation
It is not uncommon for families or individuals to find
themselves in the midst of credit card debt. Many people wonder
if credit card debt consolidation is for them. What is involved
in this process? Basically, a credit card balance transfer takes
place so that all your credit cards are consolidated into one
card. You receive one statement and deal with one company for
the full balance of all your cards. Several companies offer this
type of deal, and a Citi credit card is a good example.
Benefits:
Credit card debt consolidation can lower your monthly payments,
which is very appealing to those in need of tightening their
budgets. Combining all your credit card bills into one means
that you only pay one bill. If you were paying the minimum
balance of fifty dollars on three credit cards each month, you
were paying a total of one hundred and fifty dollars on credit
cards alone. The interest you were accumulating was at a high
rate, as well, extending the time you are required to make
payments and the total balance to be paid off.
But if you were to transfer the balance of all three cards onto
a new Citi credit card, you would combine the balances and
accumulated interest into one new balance. The Citi credit card
offers free interest on balance transfers for twelve months to
qualified card holders. So you will no longer be accumulating
interest on the unpaid balances, at least for the first year.
During this time, you can either pay only the minimum fifty
dollar (for example) monthly payment, saving yourself one
hundred dollars out of pocket each month, or you can continue
paying the one hundred and fifty dollars monthly to quickly
reduce your debt and avoid the interest that will arrive after
twelve months.
In addition,
with a credit card balance transfer, you will often
get a better interest rate. The basic Citi credit card offers an
interest rate of 10-12% after the first year on your balance
transfers. Both of these benefits add up to more cash for other
expenses.
Drawbacks:
The drawbacks to credit card balance transfer are worth
considering before you make a decision about your credit card
debt consolidation.
When you transfer your balances to a credit card with an
interest-free trial period of six months to a year, keep in mind
that the interest will go up after the trial period is up. So if
you haven't paid down your balance by then, get ready to
accumulate more interest and make more payments.
Also, most card companies will include in the terms of service
agreement a clause about default. Defaulting on your agreement
about the interest-free trial period can include making a late
payment, making a payment that doesn't go through, or going over
your line of credit. When you default during your trial period,
the interest-free part of the agreement is made null and void.
This means that you are no longer entitled to the free interest
on your credit card balance transfer. Most companies will assess
a very high interest rate after a customer defaults. The basic
Citi credit card comes with a default interest rate of about
30%. That is a huge portion of your balance and will cost you a
great deal of money.
About the author:
S.E. Kirk is the owner of SearchCardsToday.com
and CreditCard-Directoy.co
m. Kirk's sites provide consumers the ability to find &
apply for the best APR rate business and personal credit cards
online.
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