When you get your first credit card, you use it only for necessities but when you get to know how easy it is to use this plastic cash, you start increasing your expenses. The result is more credit cards and debts than you can manage. This is the story of a majority of the people who use credit card.
When you have credit card debts, you know you are in deep trouble. But when your credit card debts increase, exercising a little will power and consolidating your cards will help you get out of the debt. Given below is the 5-step process in which you can consolidate your credit card debts –
1. Compile a list Of All Your Cards and Debts
The first step you must take to get out of debts is to make a list of all the credit cards that you own and the balance against each card. Note down the rate of interest on each card. Compiling this information is essential so that you can decide the best way in which you can consolidate your card.
2. Look for Cards with Lower Interest Rates
A number of companies offer credit cards with low rates of interests. If your income is fairly good and your credit report is also healthy, then you can avail these low interest cards. But first research them and compare the interest rates. Read the fine print to know the terms of each card.
3. Pay off Outstanding Card Debts with Your Savings
A very simple and easy way to pay off all outstanding credit card debts is to use the cash in your savings. If you have sufficient cash, then repaying the debt can save a lot of interest. Otherwise, pay off the higher interest balances.
4. Get Equity Loans
For homeowners, using home equity credit is another option. You can use the equity in your home to establish a line of credit. The interest rates of equity loans are much lower than credit card interest rates. An added advantage of equity loans is that they are tax deductible. Therefore, this can serve a dual purpose.
5. Close Credit Card Accounts
Whichever method you choose to pay off your outstanding credit card debts, make sure that you do not use that card again. Cut it off after you close the account so that you are not tempted to use the card. You can do this at least for high interest cards. Keep one card to use in times of emergency and close the other accounts.
For more sound guidance on how you should use credit cards to your advantage and not disadvantage, you can visit the Bank of the Internet website. Getting a credit card is not too difficult. The difficulty comes when you are unable to control your expenses and the debts pile up. Before you use any of the above-mentioned options to pay off your credit card debts, understand the terms of each type of loan or home equity so that you do not regret your decision later on.