How To Use "Credit Card Consolidation" As A Method Of Debt Reduction
Debt reduction can be achieved through a variety of methods: bankruptcy, debt consolidation, debt settlement, debt management, debt forgiveness, and debt payoff. Of these methods of debt reduction, credit card consolidation will often be your choice, depending on your circumstances.
More often than not, credit card debts attract the highest rate of interest. Unlike other debts, credit card debts lull you into a false sense of security. Most people begin worrying about these debts only after it has spiraled out of control. The interest charges, late payment fees, and other penalties combine and the debt increases to threatening proportions within no time.
The process of credit card consolidation involves transferring your balances from various credit cards to a single lender to take advantage of the difference in the interest rates different companies charge. You can do this by taking an advance from a credit card, which will charge a relatively low rate of interest and transfer the amount to repay the dues of a card that charges a higher rate of interest. This frees up the cash in the budget that can be directed towards bringing down the remaining credit card debt.
Consolidation of credit card debt can be done by procuring a secured loan and using it to
repay off all the credit card debts. By paying off the highest interest rate creditor, the borrower saves money. This money can be diverted towards savings, which will act as a buffer against future debt crisis. Or, more preferably, the money you save can be used to repay the remaining debts at a quicker rate. Thus, debt reduction is achieved by credit card consolidation.
This method is best suited for those who are serious about lowering their debt-to-wealth ratio. Too high debt reflects negatively on an individual's creditworthiness.