Consolidation on a credit card
0 Comments Published by bill hilton on Saturday, August 12, 2006 at 2:21 PM.
If you have a lot of self-discipline - and I mean a lot - you can consolidate your debts on to a credit card and save a lot of money in interest payments.
Surely that's crazy? Surely credit cards have the worst interest rates of all? Well, yes, they do. But, once again, if you're in debt you can take advantage of the intense competition that exists between providers in the financial services industry. In the last post we looked at methods of debt consolidation by doing a lot of research into the best deals in the marketplace, and saw that a small difference in consolidator interest rates can make a big difference to what you pay back.
Using 0% credit card deals is even better, if you can discipline yourself to manage it properly. It tends not to work for really huge debts or for people with poor credit ratings, because it involves applying for new cards.
"Hold on," you're saying, "this is just getting worse. I'm already in debt, the last thing I need are new cards!"
Bear with me. These days many credit cards come with an introductory offer of 0% on balance transfers for nine months or a year. There is a fee for this - typically 2% of the transferred amount - but it's much less than you would be paying. If you can consolidate your debts on to one card you can transfer this balance to a 0% interest scheme.
To make this work, you must:
1. Not get into further debt, especially by spending on your 0% card.
2. Make regular payments - get your bank to automate this.
3. Remember to switch to another 0% deal when the interest-free period has expired. When they offer the 0% deals the card companies are gambling on you forgetting to do this. You musn't.
So, a cool method of debt consolidation, and, if you have a sufficiently good credit rating to pull it off, the cheapest. But you need to be disciplined and plan ahead!
Surely that's crazy? Surely credit cards have the worst interest rates of all? Well, yes, they do. But, once again, if you're in debt you can take advantage of the intense competition that exists between providers in the financial services industry. In the last post we looked at methods of debt consolidation by doing a lot of research into the best deals in the marketplace, and saw that a small difference in consolidator interest rates can make a big difference to what you pay back.
Using 0% credit card deals is even better, if you can discipline yourself to manage it properly. It tends not to work for really huge debts or for people with poor credit ratings, because it involves applying for new cards.
"Hold on," you're saying, "this is just getting worse. I'm already in debt, the last thing I need are new cards!"
Bear with me. These days many credit cards come with an introductory offer of 0% on balance transfers for nine months or a year. There is a fee for this - typically 2% of the transferred amount - but it's much less than you would be paying. If you can consolidate your debts on to one card you can transfer this balance to a 0% interest scheme.
To make this work, you must:
1. Not get into further debt, especially by spending on your 0% card.
2. Make regular payments - get your bank to automate this.
3. Remember to switch to another 0% deal when the interest-free period has expired. When they offer the 0% deals the card companies are gambling on you forgetting to do this. You musn't.
So, a cool method of debt consolidation, and, if you have a sufficiently good credit rating to pull it off, the cheapest. But you need to be disciplined and plan ahead!
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