What's This Buzz about Credit Card Debt Consolidation?

A Credit Article Contributed by Mark Mcclelland

Credit Card Debt Consolidation Fundamentals

Basically, debt consolidation, whether or not the debts are credit card debts can be a very attractive alternative is you're drowning in debt. The object here is to combine a lot of the small debts and their monthly payments that you currently pay to a multiple individual creditors into one larger debt with a single monthly installment payment that you make to a single creditor.

And it often turns out to that the "consolidated" payment is actually lower than the sum of the individual monthly installment payments. That's all there is to it. So you can combine existing debts into one larger debt, and you might actually be able to lower your total monthly payment to boot.

This sounds like a pretty good way to help you dig out from under all that debt, and allow you a little breathing room as well because you've been able to lower your total monthly debt repayment outlay. Now, you can bet that this next statement is some corollary to some fundamental law of the finance industry - if it's not their mantra already, but the more beneficial something is for the consumer, the less beneficial it is for the financial institutions.

And when it comes to consolidation of you credit card debts there are no exceptions here. Since consolidation of your credit card debt, and the consequent lowering of your monthly payments is not necessarily in the industry's best interest, you can be sure that they're not going to spend a lot of time coming up with ways to help you get out of debt... as a matter of fact they go to great lengths to ensure that your remain in (their)

Since consolidation of your credit card debt, and the consequent lowering of your monthly payments is not necessarily in the industry's best interest, you can be sure that they're not going to spend a lot of time coming up with ways to help you get out of debt... as a matter of fact they go to great lengths to ensure that your remain in (their) debt.

Consequently, there are only two ways you can get out of debt - well, actually there're four, but dying and winning the lotto don't count.

Consolidating Your Credit Card Debt with a Debt Consolidation Loan

Debt consolidation loans are secured loans to take out with the intent of paying off your outstanding credit card balances. These loans can be especially helpful to folks that meet specific criteria, and disastrous to those don't. They're beneficial only if you have a large debt load you'd like to whittle away at but aren't in financial straits - meaning that you have a good, stable job or other source of income that allows you to both make the payments and maintain your standard of living.

But this doesn't describe your situation, a debt consolidation loan is not for you. Why? Well, debt consolidation loans are secured loans, meaning that you have to put up some security, or collateral, to get the loan... like you house. If you don't have a job or some other income source that allows you to maintain your standard of living, you'll likely start missing the consolidation loan payments and guess what the lending institution's going to do... yep, they're going to take back their collateral - your house. Now you're worse off than before.

Credit Card Debt Consolidation Using Another Credit Card

The other alternative is to consolidate all of your existing credit card debt onto another credit card. All you need to do is accept one of those offers you get in the mail for a 0% introductory rate with fee free balance transfers, transfer the balances from your other cards onto this new one - thus consolidating your debts - and start making payments to the new card. That's it. Oh, by the way, you're going to cut up those other zero balance credit cards aren't you?

But there are traps here as well. What do you do if the credit limit on the new card isn't sufficient to support all your other debts? You could always transfer as many of the highest interest rate balances to the new card, as possible and then still make multiple, but fewer, monthly payments. OK, so what do you think will happen if you're late on even ONE of those new payments?

You can bet that the 0% introductory rate is a goner and the card issuer is going to slap you with both fees and an almost usurious interest rate. And you do realize that you now own yet ANOTHER credit card don't you? There's no such thing as a free lunch, especially in this industry.