The Nightmare Of Credit Card Debt And How To Beat It Through Debt Consolidation.
By Tanya Coles
‘Credit card debt’ is a much discussed topic in the commercial and social circles. A big section of the population has been bit by this bug called ‘credit card debt’. Can’t blame them much; as such, it’s pretty easy to fall prey to this bug.
The main reason behind so many card casualties (rather card debt related casualties) is that many people don’t understand the concept of cards properly. They treat card as free money that is never to be returned. Thus all the discipline, which would otherwise have been exercised with spending hard-earned money, goes for a toss.
That means people overspend and get into card debt. They keep spending till they reach the limit on their card. Some people go to the extent of treating that like a game and consider it a defeat (or consider their card under utilised) if they don’t hit the limit quick enough.
These unnecessary spends result in a situation where they are not able to payback their card bills and end up paying interest on the amount they owe. This keeps building up their card debt and they soon find that the interest component has become a regular feature in their monthly expenses and it is there even if they spend nothing on their card. That is card debt on the prowl.
Soon they find that their current card can no longer handle their needs and start looking to get another card. With the new power of credit, they let themselves loose again and follow a ‘shop till you drop’ routine. Soon the limit of the new card is reached too and they again default on payments. This is how card debt builds.
Soon they learn about card debt consolidation and other card debt elimination techniques. They are quick to grab such card debt reduction techniques, but that’s not because they are serious about reducing their card debt but because of the attractive low APR offers. As if it were booty, they again get back to building up their card debt. All the while they are spoiling their card rating and they soon realise that no one is ready to lend them money because of their history.
They can only get a secured card now (where you first deposit money into your account and then only you get the privilege of spending it (50-100% of it) using their card. card debt collection agencies, auction of their goods and bankruptcy is the next thing that hits them and their dream run is blown away in a moment.
The moral of the story – “Understand the concept of cards and treat card debt with all seriousness”. Now we will shift our attention to Card Debt Consolidation.
Credit card debt is a nightmare of a problem and unfortunately there a lot of people who face this today (and if others don’t pay heed, they might get trapped into card debt too). card debt consolidation is generally regarded as the most important step in card debt reduction and elimination.
So what is ‘Credit card debt consolidation’?
Credit card debt consolidation is the process/strategy to consolidate debt from multiple cards into lesser number of cards (ideally one or two cards). card debt consolidation is sometimes also referred as a balance transfer where you transfer your balance on one card to another card. Generally, the balance transfer (or card debt consolidation) is done from cards with higher APR to cards with lower APR. card debt consolidation
can also be achieved by going for a bank loan (at a lower interest rate) and using that towards paying the debt on the higher APR cards. This loan is then paid-back to the bank in the form of monthly installments.
As you would have noticed, a lot of card suppliers and banks keep coming out with attractive offers for card debt consolidation (or balance transfers). There is no dearth of 0% APR offers for card debt consolidation. However, card debt consolidation is a serious exercise and you must exercise caution so that you don’t get into deeper trouble.
When going for card debt consolidation, you must properly analyze the offers from various banks and card suppliers. Check the time period for which 0% APR is being offered and also the APR that would be applicable after the lapse of that period. Generally, 0%APR is valid for a 6-12 month period only. So, if you are confident of paying back a considerable amount of debt in that period, this kind of card debt consolidation will work for you even if the APR (post 0% period) is a bit higher.
However, if that is not the case, the long term APR is going to be the most important thing for you. If the long term APR is more than the APR for your current card, this kind of card debt consolidation will be futile for you. Also, check processing charges etc before you actually go for balance transfer or card debt consolidation with another supplier/bank. Another good idea is to check with your current card supplier and see if they can offer a lower APR to you in order to help you in clearing off your debt (you would be surprised that they do oblige at times and hence eliminate the need for card debt consolidation).
It’s important that, with card debt consolidation, you also inculcate good spending habits; otherwise card debt consolidation would really be of no use to you.
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