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Reducing Interest on Your Existing Debt by Consolidating Credit Cards.

    

 Whether you've had an emergency or were living beyond your means, you may find yourself with credit card balances that you can't easily pay off. One way to help manage and pay down your credit card debt is to consolidate it.

Managing Credit, Personal Finances

What Is Credit Card Consolidation?

Credit card consolidation moves all of your credit card debt into a single account. You can either transfer your balances onto one card or apply for a personal loan. Consolidating gives you several advantages:
  • Lower interest rates
  • A single monthly payment
  • The ability to close your extra credit cards if it will help you control your spending habits
  • A potentially higher credit score

What to Look for in a Consolidating Card

It's often easier to consolidate debts into an existing credit card or apply for a new card than it is to obtain a personal loan. Here are some of the things to consider when consolidating credit card balances onto another card:
  • Is the interest rate lower?
  • Is the interest rate permanent or temporary?
  • If the interest rate is temporary, can you pay off the balance before the special rate expires? If not, what is the regular rate?
  • Is the offer a "deferred interest" offer? This means that if you don't pay off the balance by the end of the promotional period, you'll be charged back interest as if you never had the promotional rate.
  • If you make additional purchases on the card, will the promotional rate apply?
  • What are the balance transfer fees? Consider these as extra interest when you compare rates.

How a Credit Card Balance Transfer Works

You can visit TDECU.org or call 1.800.839.1154 to learn more about a balance transfer at TDECU. When you request a balance transfer, the consolidating card will send a payment to your card with the balance.

Continue to make your minimum payments until your account reflects a zero balance. Balance transfers can take several weeks, and you are responsible for making payments until they are final.

Saving Money vs. Increasing Your Credit Score

When deciding how to consolidate your debts, you should consider both how to cut your interest payments and how to raise your credit score. A higher credit score can qualify you for lower interest rates and better balance transfer offers.

Most banks and credit unions use FICO Scores, so you should understand how this scoring model works. Thirty percent of your score is made up of how much of your credit limits you're using. The more credit you use, the lower your score. There's an additional scoring penalty if you have one or more cards at or near their credit limits.
If you already have a card with a very low interest rate (our rates are very competitive) that you can transfer all of your existing debt to, you don't need to worry about maxing it out. However, if you only have high-interest rate cards, you may save money in the long run by working on your credit score first so you can qualify for low-interest rate cards.

Because having available credit helps your credit score, you should try to leave your other credit card accounts open even if you cut up the physical cards. However, if you do decide to close them, know that your positive payment history will continue to help your credit score for 10 years after closing the account.

What's Next?

Credit card consolidation can help you manage existing debt, but it won't keep you from adding new debt. We offer financial education and counseling services to help you plan a budget, build your emergency fund and avoid future debt.
Ready to apply for a loan or credit card? Get started.
 

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