Here’s a pop quiz for you. How much does the average American household carry in credit card debt? $2,000? $4,500? $15,000? If you guessed $15,000, then you’d be right according to a Forbes article.
With averages like this, it’s easy to see why so many people talk to Second City Advisors about debt consolidation. If you’re thinking about going this route, but aren’t sure if it’s a good choice, then take a look at the following list. It gives you three good reasons why you should consolidate your credit card debt.
1. One Payment Each Month
If you have two or more credit cards, then it’s likely that you know what it feels like to have to track down and pay multiple bills each month. Over the course of time, it becomes inevitable that at least one of these payments will be forgotten, due to the pressures of day-to-day living. It’s something that clients of Second City Advisors deal with all the time.
We get it. Life does get in the way. The more you can simplify it, the better chance you have of not forgetting payments. It’s one of the chief reasons why you should consider credit card consolidation.
2. Improved Credit Score
Consolidating your cards allows you to immediately “pay off” the limits of all of your cards. This raises your credit score immediately because your credit score shows that you’ve paid off multiple credit cards. Additionally, because you won’t forget payments, you’ll eventually strengthen your score because of all of the on-time payments you’ll make.
The importance of your credit score can’t be understated. If you have a lagging credit score, then you will find it difficult to borrow money to buy a home or a car. What loans or credit cards you do qualify for usually come with a higher interest rate. And some jobs that you apply for may be out of your reach. Some employers automatically check an applicants credit score as part of the vetting process. Improving your credit score is one of the many benefits of consolidating your credit cards; it definitely has far-reaching advantages.
3. Lower Interest Rates
If you’re paying interest on your loans, then you owe what you originally borrowed plus extra, and as Nerd Wallet points out, that extra could be quite a bit of cash. Credit card interests rates were lingering around 15% (as of 2014). So, basically if you keep a $2,000 balance on your card and your interest is 15%, then your annual interest is $300.
However, you can make that interest rate go away if you apply for a new card with the option of the balance transfer. Many of these card offers don’t charge interest for the first six months to a year. If you can pay off the balance on the card in that time, then you’ve saved yourself a bunch of interest.
Last Thoughts
Credit card consolidation can be a smart way to conquer your credit card debt. It certainly has tons of advantages. When you consolidate, you get lower interest rates, a better credit score, and just one bill (instead of many). Consolidation can make your financial life so much better. Best of all, it’s easy to do and offers you immediate benefits to boot