We know that it’s good to consolidate credit card debt. In fact, the first step towards addressing the problem of credit card debt is to consolidate it. Now, what do you do to consolidate credit card debt? Should you just go with that attractive ad in the newspaper that says ‘...the lowest APR is available here’?
The first thing is to keep your eyes open. There are always offers available for you to choose from. The credit card suppliers keep coming up with new and more attractive offers asking you to consolidate credit card debt with them. However, you must note that the APR quoted in bold, e.g. 0% APR, is applicable only for a short term (usually 3-9 months). The long term (or the standard) APR is different. So, when you go looking for a credit card to consolidate credit card debt, you must be looking for these 3 things (in terms of APR) – introductory APR, introductory APR period and the standard APR. Let’s see how each one is important.
- Introductory APR is probably the most attractive thing to look for when you are looking to consolidate credit card debt. If you consolidate credit card debt to a card that has a low introductory APR e.g. 0%, the first thing you get is a hiatus in terms of the rate at which your credit card debt has been growing.
- Based on how long that 0% APR period is (generally you will look to consolidate credit card debt with a credit card supplier that offers 0% initial APR), you will at least be able to temporarily break the growth rate of your credit card debt. The longer the introductory period, the better it is.
- However, you should not ignore the standard APR when you consolidate credit card debt. This is the interest rate that will be applied to your balance after the expiry of the introductory low APR period that was given to lure you to consolidate credit card debt with that credit card supplier. If the standard APR is too high and you know that you will not be able to clear off the entire credit card debt during the low APR period, that credit card is probably not the best for you to consolidate credit card debt to. However, if you think that you will be able to clear off the entire credit card debt during that period, you can make some compromises on the standard APR of the credit card to which you consolidate credit card debt.
The card that integrates with your current and future financial position (and needs), is the one you should consolidate credit card debt to.
Credit card debt is really a menace and a lot of people are facing it around the globe. Credit card debt consolidation and bank loans are well known as ways of reducing and eliminating credit card debt. In all this confusion, credit card debt negotiation almost gets forgotten.
Credit card debt negotiation starts right from your credit accounts where you have the most hard-hitting credit card debt. This means credit card debt negotiation has to be taken up with your current credit providers. Before you misinterpret it, let me clarify that we are not talking about chucking off a portion of your debt through credit card debt negotiation. We are talking primarily about using credit card debt negotiations for getting the APR on your current credit cards reduced to some lower figure.
So, credit card debt negotiation is about talking to your current credit card suppliers to inform them of your intention to clear off your credit card debt and using your skills (credit card debt negotiation skills) to agree a lower APR rate with them. Basically, credit card debt negotiation is about asking your current credit card suppliers for help/assistance in clearing off your credit card debt. If credit card debt negotiation is successful, it will save you not only money (due to reduction in APR) but also the hassle that is associated with looking for a new credit card (to transfer balance).
However, if the credit card debt negotiation, with your current credit card supplier, doesn’t yield the desired results, you will have to look for other credit suppliers who can help you in consolidating your debt. Again, you will need your negotiation skills to get a good deal from them. If your credit card debt negotiations work out well, you might be able to get a really low standard APR or you might get a longer term on 0% APR (or you might get both). These are really the most important things and your credit card debt negotiations should concentrate more on these than anything else.
The other thing to include on your credit card debt negotiation would be the credit limit and other benefits. Here, you are basically trying out the possibility of getting a better credit card as part of your credit card debt negotiation. For people with really bad credit rating, getting an unsecured bank loan or getting another credit card (for balance transfer) is really difficult. For them, getting an unsecured bank loan or credit card is what you would term as credit card debt negotiation.
So, don’t hesitate in going for credit card debt negotiation. It is an option available for all.
Before you seek credit card debt help
You will find that there is plenty of credit card debt help available. Just flip through the newspaper and you would be surprised by the number of advertisements related to credit card debt help. Television channels are full of ads related to credit card debt help. There are websites and magazines that are dedicated to credit card debt help. Governments, teachers, families and friends all add to the cacophony of advice. Banks seem to offer credit card debt help in terms of various loan types (generally short term loans) at low rates.
Not every one offering credit card debt help is proficient enough to be able to provide proper credit card debt. You do need to understand some basics about credit cards and credit card debt, before you actually go looking for credit card debt help or before you start helping yourself out with your credit card debt.
Try and understand how the credit card suppliers bill you, how the interest is calculated on your credit card balance and how your credit card debt grows. Understanding all about APR, goes without saying. Even if you think that you had gone through all this stuff at the time of choosing your credit card, you should revisit these concepts to make sure that you still have retained the information.
If you decide against going for professional credit card debt help, you will need to understand these concepts in greater detail. All these concepts will become handy when you are comparing various balance transfer offers (for example). Moreover, the knowledge of these concepts will also be helpful in making the discussions with a credit counselor more fruitful.
So credit card debt help really starts with developing a better understanding of credit cards and other concepts related to credit cards (irrespective of whether you go for external credit card debt help or not).
Credit Card Debt
Credit cards are no longer a luxury, but almost a necessity. So, you could visualize a lot of people going for credit cards. In fact, a lot of people possess more than one credit card. So, the credit card industry is growing by leaps and bounds. However, the credit card industry and credit card holders are posed with a big problem called ‘credit card debt’. In order to understand what ‘credit card debt’ actually means, we need to understand the associated causes.
Credit cards, as the name suggests, are cards on which you can get credit i.e. borrow (your credit card debt). Your credit card is a representative of the credit account that you hold with the credit card supplier. Whatever payments you make using your credit card are actually your borrowing that contributes towards your credit card debt.
Your total credit card debt is the total amount you owe the credit card company. In order to avoid interest payments, you must settle your entire credit card debt on a monthly basis. You receive a monthly statement or your credit card bill which shows your total credit card debt. You must pay off your credit card debt by the payment due date, failing which you will incur interest charges.
If you habitually fail to pay off your credit card debt in full, the interest charges add on to your credit card debt each month to form the new balance or the new credit card debt amount. If you continue making partial payments the interest charges are calculated afresh on the new credit card debt. You end up paying interest on the last month’s interest too. (If you fail to make the mandated minimum payment, there will be other penalties, which could include a demand for immediate payment of all amounts due.)
Thus your credit card debt accumulates rapidly and soon you find that what was once a relatively small credit card debt has ballooned into an amount that you find almost impossible to pay off.
You should try your hardest to pay large percentages of the amount due and settle your account as soon as absolutely possible. Credit cards rank high in the cost of borrowing. Interest rates exceeding 20% are the norm as opposed to loans against property, available through your banking institution, which can be a quarter of the interest rates available through the credit card route.
If you are in serious trouble with credit card payments, seek the help of a debt counselor. These people can help you work out methods of settling debts.
Certainly do not take the road of going for “payday” loans. The cost to borrowers using this method, while appearing on its face to be reasonable, will usually far exceed the original interest on the credit card.
