Read through your credit card offers and disclosures very carefully. A lot of information is hard to understand (and find). Some offers waive the fees for the "initial balance transfer" only. This could be your first transfer and not the additional ones.
Each additional balance transfer will be treated like a cash advance and charged cash advance fees, which are very expensive and often carry very high interest rates.
If you feel comfortable with the terms offered to you, fill out the balance transfer form carefully. Mistakes can mean that the transfer won't go through and you may be late on a payment. Keep making the minimum payment on your old card until you are absolutely sure that the balance transfer has been completed. This can take two to four weeks. You don't want to try to lower your payments and still receive a late fee and penalty which can cause you to spiral out of control.
Even though the new card company will contact you when the transfer is complete, you still need to talk to your old creditor and verify everything went through. Call and verify that there is no balance left on your account. Write down the representative, time, date and what is said every time you talk with a company over the phone. Make sure to document every piece of communication and correspondence. You will need this information if something goes wrong with the transfer.
Have your card company send you a billing statement with a zero balance stated on it. You may need this in order to clear up any mix-ups with reporting to the credit bureaus. Oh, don't forget to close your old card, you don't want to accidentally charge on it!
There are some situations that can occur when you are consolidating your credit cards.
You don't want to suffer because you are taking control of your credit. Manage your transfers well and you should avoid errors such as late payments.
Don't cancel a card that still has a balance. This causes your rate to shoot up, because they know that they have to get the most out of you now for fear that you won’t pay them at all. Don't even tell a card issuer that you are leaving until you have no balance. Many issuers will raise rates if you cancel an account with a balance remaining.
Pay all of your accounts on time no matter what. It can take one late payment for your interest to go from 9% to 28% on all of your credit cards. Astonishing, isn't it?
Don't start closing all of your cards before you apply for a mortgage or car loan. This can make your chances of approval even lower. Credit scoring is based on many factors, including how much debt you have and how much available credit you have. If you have cards with no balance on them, it can raise your credit score because it shows you have control and are not abusing the credit line which was granted.
You need to remember, even if you find better terms for your debt, it is still debt and it won’t go away on its own.
You must be sure that you pay it off before you add to it. If you don't, then you will never end the cycle.
Consolidation doesn't offer you a new start, just a better path to paying off your debt. If you truly want to get rid of your debt, use consolidation as a way to put all of your debt in one payment. And get out the scissors.
Home
