More consumers in need of credit card debt consolidation loans or simple consolidation options are considering a balance transfer credit card as these forms of credit can offer the opportunity to compile all of a consumer’s debt onto one card, which usually comes with either little or no interest for a set period of time, and this could lead to a cardholder being in the position where they can erase these debts without paying additional costs related to interest. Yet, as more banks are beginning to offer a variety of cards from bad credit credit cards to simple balance transfer credit card offers, consumers may find that their are considerations that must be taken before using a balance transfer card to consolidate credit card debt.
Some consumers have turned to simple credit card debt consolidation loans as a way to find more affordability when they are repaying credit card debts. Essentially, some cardholders may have, through either bad financial practices or financial emergencies, amounted a great deal of credit card debt and, when multiple cards and interest rates are a factor, the overall costs could be incredibly high and minimum monthly payments may be causing financial distress in the life of a borrower.
One reason consumers usually turn to credit card debt consolidation loans is because they will come with, in many cases, a lower monthly payment and, obviously, only combating one interest rate will be more affordable than multiple rates on numerous cards. While there are some financial advisors to argue against consolidating credit card debts, as smaller principle amounts on multiple cards may be easier to repay their one large lump sum, this is simply not an affordable option in certain instances and, as a result, leads to a consumer being in need of debt consolidation.
However, traditional debt consolidation loans will, again, usually come with an interest rate, and although it may be more affordable than multiple rates on various cards, will still lead to higher overall costs, especially if the repayment timeframe for a debt consolidation loan leads to a longer period where a consumer is paying down this obligation. Yet, what has drawn many consumers to balance transfer credit cards is the fact that they offer little or no interest for an introductory period and, as a result, can eliminate interest rate charges.
Yet, many advisers and credit card websites have listed out some of the elements that consumers must focus on when considering a credit card balance transfer. As an example, CardRatings.com says there are four key elements that consumers must consider before entering into a credit card balance transfer agreement, as consumers must be aware of the “interest rate charged on the transferred balance, length of the introductory rate, balance transfer fee, and the interest rate on the balance after the introductory period ends.”
After making these considerations, some consumers have found that they either cannot erase their balance during the time where the introductory period is low, the fees charged for this card are simply too high, or in some cases the rate after their introductory period has ended is simply too expensive and, as a result this type of card may not be in their best interest. Yet, those who may have a reasonable amount of credit card debt have been able to benefit from these balance transfer options through credit card debt consolidation, but again, specifically looking at all of the conditions a balance transfer card entails is vital so that a consumer will not end up paying more than had they simply left their credit card debts separate and formulated an alternative repayment plan.