Debt Consolidation Keep Credit Cards

Published October 10, 2023

Introduction

Debt consolidation can be a helpful solution for managing multiple credit card debts. By combining all your debts into one, you can streamline your monthly payments and potentially save money on interest rates. However, just because you are consolidating your debts does not mean you should give up your credit cards altogether. In fact, there are ways to make the most out of your debt consolidation while still keeping and even using your credit cards. In this post, we will share some tips to help you maximize your debt consolidation and save money in the process.

Understand the Basics of Debt Consolidation

Before we dive into our tips, it's important to have a clear understanding of what debt consolidation entails. Debt consolidation involves taking out a new loan or credit card to pay off your existing debts. This new loan usually has a lower interest rate and a longer repayment period, making it a more manageable option for those struggling with multiple credit card debts. It is important to note that debt consolidation does not eliminate your debts; rather, it just combines them into one payment. It is essential to stick to your payment schedule and not accumulate more debts while in a debt consolidation program.

Pay Attention to Balance Transfer Fees

Balance transfer is a popular form of debt consolidation where you transfer your multiple credit card balances onto one credit card with a lower interest rate. While this can help you save money on interest, it is important to pay attention to balance transfer fees. Some credit cards may charge a balance transfer fee of 3-5% of the transferred amount, which can add up quickly. Make sure to factor in these fees when considering a balance transfer option and compare different credit card offers to find the best deal.

Keep Your Credit Cards, But Use Them Wisely

While consolidating your debts, it may be tempting to close all your credit card accounts to avoid further debt. However, this can negatively affect your credit score. Instead, consider keeping your credit cards open and using them for small purchases, but make sure to pay off the balance in full each month. This will not only help you maintain a good credit score but also prevent you from racking up more debts. Additionally, using your credit cards responsibly can help boost your credit score over time, making it easier for you to secure better loan and credit card offers in the future.

Set a Budget and Use Cash

One way to ensure you don't accumulate more debts while in a debt consolidation program is to set a budget and use cash for your purchases. This will help you stick to a spending limit and avoid overspending on credit cards. You can also use budgeting apps or spreadsheets to track your expenses and stay on top of your payments.

Take Advantage of Reward Programs

Many credit cards come with reward programs that offer cashback, travel points, or other incentives for using your card. While in a debt consolidation program, you can still take advantage of these reward programs by using your credit cards for necessary purchases and then paying off the balance in full each month. This way, you can benefit from the rewards without falling into more debt.

Negotiate Lower Interest Rates

You can also try negotiating with your credit card companies for a lower interest rate. Explain your situation and mention that you are considering debt consolidation. As a loyal customer, they may be willing to lower your interest rate to keep your business. This can result in significant savings over time, especially if you have a high-interest rate on your current credit cards.

Consider Credit Counseling

If you are struggling to manage your debts and need expert guidance, consider seeking credit counseling. A credit counselor can help you come up with a personalized debt repayment plan and offer valuable advice on how to manage your credit cards wisely. They can also negotiate with your creditors on your behalf and help you find the best debt consolidation options for your specific financial situation.

Conclusion

Debt consolidation can be a useful tool for managing multiple credit card debts and saving money on interest rates. However, it is important to use this solution wisely and not fall back into bad spending habits. By implementing these money-saving tips, you can maximize your debt consolidation while still keeping and using your credit cards responsibly. Remember to always research your options, read the fine print, and seek professional help when needed to ensure a successful debt-free journey.

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