Less is certainly more when it comes to credit cards. Spreading your debt across different credit cards will only make it harder for you to manage, and means you will be accruing more interest rate charges. If you are feeling stuck between a rock and a hard place and want to break your credit card debt, consider consolidating your debt into one.
Why should I consolidate my debt?
Do you have a couple of credit or store cards which plague you with constant reminders of outstanding debt? Have you and your partner got separate credit cards but pay off your debt together? Trying to manage your debt when it's coming from every angle can be difficult, not to mention costly.
Consider chatting to your financial institution, or looking for a new credit card, to roll over your debt into one, as this will allow you to better manage your repayments and also result in you paying less interest fees and charges.
What should I be wary of when consolidating debt?
Consolidating your debt isn't an easy fix. While it's often a smarter way to manage your debt and could help you pay off your debt sooner, you do have be aware of the fine print.
Things to look out for:
- Check that your new interest rate is lower than what you are currently paying, otherwise you may end up finding yourself in more debt.
- Don't forget to take into consideration the fees and charges.
- If you have arranged a balance transfer that has a low rate, or no rate, introductory period make sure you check what the interest rate is after this period ends and commit to paying off your debt during the intro period.
- If you are considering a credit card provider that is not well-known, check they are licenced by ASIC.
- Be cautious when companies offer 'credit fix', 'credit repair' or 'debt solution' and charge a fee on the assertion they will improve your credit rating. Credit card defaults are automatically marked against your name and cannot be removed unless you prove it's incorrect.
Many credit card providers offer special introductory rates that can even be as low as no interest for a certain period of time. As well as the introductory rate varying between credit card providers, the intro period also varies so make sure you compare credit card debt consolidation options at RateCity.