Pros and cons of consolidating credit cards
Cons: Most credit card companies charge an initial balance transfer fee.About 3 percent of the transferred balance is standard.If you make a late payment, you’ll likely lose that promotional 0 percent rate.Finally, you’re still stuck with revolving debt, which can be trickier to manage than fixed amount installment payments.“It’s kind of like yo-yo dieting, you can end up with more debt than you started with,” he says.How to shop: Look for an offer with no balance transfer fee, Berger says.
If you don’t want to close the old account, you might have to cut up the card, Berger says.
Depending on the consolidation method, you will end up with either revolving debt or with an installment loan that has fixed monthly payments for a set period. To consolidate in this way, look for a 0 percent or very low-interest balance transfer offer and apply for the new card (or you may receive balance transfer offers with a current card you are carrying).
Each type of debt consolidation has its pros and cons, and the best choice depends on the situation, says Cary Carbonaro, certified financial planner and author of “The Money Queen’s Guide: For Women Who Want to Build Wealth and Banish Fear.”“There really is no one-size-fits-all,” she says. When you apply, you’ll supply the credit card number and amount you want to transfer from your old card.
However, a statement may be placed on your file to indicate you are repaying loans through a debt management plan, and that will be visible to lenders who check your credit while you’re on the plan.
In some cases, you might be able to keep one credit card open if you need it for work to pay for hotels, car rentals and other expenses reimbursed by your employer, Opperman says. How to shop: Look for a reputable nonprofit credit counseling agency.Pros: Credit counseling agencies will negotiate with your creditors for both lower interest rates and lower monthly payments.