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One Simple Way of Consolidating Credit Card Liability

John Frazier

Debt is something that has to be managed, and can easily get out of control if you're not conscientious. Credit card debt in particular is among the most troublesome financial problems for customers today, and consequently millions of credit card consumers are looking for ways of consolidating credit card debt as a means to better direct their financial responsibilities. While it is imperative to get a good handle on your credit card accounts and ensure that you haven't extended yourself beyond your means, consolidating credit card debt itself can sometimes create even more financial suffering if you don't take great care in how you approach this major financial issue.

One very common form for consolidating credit card obligation is to transfer the balances of your higher rate cards to a credit card that has a lower annual interest charge. For illustration, you may have two or three credit cards with balances of a few hundred (or few thousand) dollars each, and those cards may carry an yearly interest rate of 17 percent, 18 percent, 20 percent, or even more. Obviously you should be able to save a substantial amount of money each year in interest by moving those balances to a card that carries a lower interest rate. For instance, you may be able to transfer the balances of those elevated-rate cards to a another card that carries only a 13.5 percent interest rate. Yet on a balance that is currently being charged only a few percentage points higher, such as 17 percent, you will save significant real dollars -- unquestionably enough to consider this as a method for consolidating credit card debt.

Hold on a minute though.. Before you immediately transfer that balance, there are a number of pitfalls that you may fail to notice when consolidating credit card debt in this approach, and it is critical to consider them before you reposition your money:

Some credit cards offering lesser interest rates may only be offering them as a "teaser" or preliminary rate. That way the credit card's annual percentage rate may grow at some point in the future, when the teaser rate expires. You should check carefully to make sure that you comprehend exactly what the rate will be in the future as you pay down the balance you transferred from the first card.

If it turns out that consolidating credit card debt by moving the existing balances to a lower-rate card will perform well for you, then you in fact need to make sure you have a plan to deal with the higher-rate card that will suddenly have a nil balance. Too often citizens can fall prey to the "empty card" syndrome and find themselves charging things again on that newly empty card, simply because it has no balance and it offers a handy payment method. If you fall victim to this mentality, then you may find yourself right back where you started in no time. Instead, put that card away in a place where you're not likely to use it, unless faced with a severe emergency. Or else, your judgment to endeavor consolidating credit card obligation and saving yourself some funds in interest may come back to bother you.

Combining credit card liability by moving balances to a lesser-rate credit card is one potential way to save money on interest, but watch out the hazardous pitfalls of teaser rates and blank card syndrome. Credit and debt have to be managed wisely, or you may find yourself in grave financial trouble.

Source: Articles Universe: http://articlesuniverse.com

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