People who are in debt (credit card debt) often get to hear this advice, “Consolidate credit card debt.” So, what does “Consolidate credit card debt” mean? Well, pretty simply, “Consolidate credit card debt” means consolidating the debt on various credit cards into one or two credit cards. This consolidation can be done either through a low interest bank loan or by transferring balances to a new credit card (i.e. transferring the amount you owe, on one or more credit cards, to a new credit card(s)).

So what should you do when you are looking to consolidate credit cards? The key item to look for is the percent annual interest rate. Whatever method you adopt to consolidate your credit card, the percent annual interest rate is truly the sole criteria to review. If you use a bank loan to consolidate credit card debt, the interest rate on the bank loan should be lower than the interest rate of the credit cards whose debt you are consolidating. Similarly, if you are moving to another credit card, you must make sure that the interest rate of the new credit card is lesser than the credit cards whose debt you are consolidating. However, there is a catch that you must be aware of when laying out a plan to consolidate credit card debt. The percent annual interest rates advertised by most credit card suppliers are the short- term percent annual interest rates, which are meant to lure you to consolidate credit card debt with them. By short-term, we mean percent annual interest rates that will be applicable only for an initial period of less than 12 months or some other period after which this rate increases. When you begin to consolidate credit card debt with these credit card suppliers, they will offer you a lower (even 0%) percent annual interest rate for the first 6-12 months; and a much higher rate following that period. You should confirm what this higher rate would be after this period. As mentioned previously, your decision to consolidate credit card debt will be fruitful only if the new percent annual interest rate is lower than or equal to this same rate on your current credit card. You might check with your current credit card supplier to see if this rate could be lowered (if that works, it will make things easier for you).

Before you move on to consolidate credit card debt you should understand that consolidating credit card debt will be beneficial only if you pledge to adopt and follow disciplined approaches to credit card usage, i.e. controlled spending and regular/timely payment of credit card debts.

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