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When we consider why we should consolidate credit card debt, there are a number of factors to be taken in to consideration, not the least of which, however, is the fact that we are likely to save ourselves a considerable amount of money by doing so.

Credit card debt is the type of debt upon which the vast majority of us will pay the highest level of interest. This is for the simple reason that unsecured credit card debt presents the greatest amount of risk for lenders. Secured debt (generally the cheapest form of borrowing) gives the lender the security of knowing that should we renege on our payments at any time, they can lay claim against our property in order to recoup the amount we owe. Unsecured debt in the form of a personal loan is the middle ground in that although the lender does not have security as such on our debt, they have lent us a specific sum over a specific period of time and the risks are measured. Credit cards, however, although generally with spending limits applied, allow us to accumulate debt, pay it off, then re-accumulate it without the lender having access to perhaps any update in our personal financial circumstances.

There has been much made in times of Credit Crunch and economic recession that although bank base rates have been reduced to almost zero, credit card companies are charging us ever higher rates on the amounts of our outstanding balances. This means that in real terms, we are paying interest rates many times those which we were paying prior to the economic collapse. It is therefore more likely now than ever that we stand to save a considerable amount of money by taking advantage of any opportunity to consolidate credit card debt.

When we look at how we should go about consolidating credit card debt, we have to ensure that we do so in the correct fashion. We should approach a reputable lender with details of all those debts which we have outstanding and determine their rates and terms. Generally, they will be able to issue us with a quote which is valid for a specified period of time. There is nothing whatsoever to prevent us approaching several lenders in this respect as we should ensure that we secure the best deal available to us.

We should remember when consolidating credit card debt that we are likely to be taking on a commitment over a period of at least several years. Depending upon the deal we secure, the commitment may be fixed or it may be variable. What we do not wish to happen, however, is for us to take on this commitment only to once again accumulate the debt on our credit cards. It is therefore vital that we not only clear the outstanding balance on our cards but ensure our accounts are closed that temptation may not stand in our way at a future time.

We will almost certainly save ourselves money when we consolidate our credit card debt so we should use these funds wisely. We should ensure that we save a substantial percentage of them for a future rainy day or perhaps with a view to paying off our new debt early at a later time. Above all, we must learn our lesson from the situation we have just escaped and determine it is not a mistake we shall make again.

Learn more about this author, Gordon Hamilton.
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