Most people are aware the disadvantages, and even dangers, of
handling too many things at the same time. Whether it's with
work, family, or relationships, having too much on one's plate
takes away focus, making one less effective for any of the tasks
concerned.
However, people tend to overlook this nugget of wisdom when it
comes to managing their credit cards. The average person is said
to hold as many as seven credit cards at a time - all of which
are being actively used.
Just keeping track of expenses made is difficult enough. But
then one still also has the unfortunate task of keeping track of
the varying interest rates for every card - a difficult task,
even for experienced credit card users.
Unfortunately, when these complicated but important tasks are
left unmanaged, interest can accumulate until one finds out, a
bit too late, that they have incurred a considerable amount in
debt.
Fortunately, there are solutions to that problem. One of which
is credit card consolidation. It is a basically putting together
the balances from different credit cards and paying it off with
a single card of a lower interest rate.
This solution works allowing the person in debt these advantages:
1. Payment manageability This solves the problem of needing to
keep track of different payments for different bills. This alone
helps alleviate anxiety as a single statement tends to overwhelm
a person less, compared with a series of bills.
2. Lower interest rates By transferring your balances to a lower
interest card, you stop the accumulation of higher interest from
other cards and avail of a lower finance charge for your
consolidated debt.
However, that said, this solution is not a general fix-all for
all debt holders. Considerations need to be made before credit
card debt is consolidated.
Part of it starts by taking stock of how one got into the
situation in the first place. This means looking at the present
collection of credit cards and their interest rates. If they all
have the same rate, then consolidation may not be necessary.
Another consideration is the usage for these cards. Ideally,
credit cards should be used only to bridge gaps in cash flow.
But when it becomes the primary method to pay for food,
utilities and other bills, the solution may need to be more than
simple consolidation. More serious and in-depth financial
counseling may be necessary.
It is also important for one to choose wisely as to which credit
card will be used to consolidate other cards with. Simply going
for the one with the lowest interest rate may not be the best
solution. One has to be able to see well into the next 6 to 12
months as the debt is paid off. Will the lower interest rate
hold for that duration or will it increase rapidly within that
time? A manageable rate is generally around 15%.
Consider the duration of the grace period for each card.
Availing of the lower rate may not be possible if payment is not
made by due date. The length of the grace period then becomes
helpful as it allows more time to pay without incurring
additional finance charges. In general, a 25-day grace period is
a good offer.
Furthermore, remember that consolidating credit card debt is
just part of the general debt management program. Another
important aspect is preventing further debt, which means
significantly lowered credit card use. Many fall into a false
sense of security because of having only to deal with one
account statement. One then begins to use credit cards again as
carelessly as before, therefore perpetuating a vicious cycle.
As it is with most things, credit cards are simply tools that
can be mastered rather than the other way around. This can be
prevented if discipline in managing one's resources is learned
and honed and applied in all future transactions.
About the author:
Morgan Hamilton offers expert advice and great tips regarding
all aspects concerning Credit Cards. Get the information you are
seeking now by visiting
Prepaid Credit Cards
