Debt consolidation can be accomplished by transferring the balance of one credit card to another. The debtor, when considering consolidating debt with a balance transfer, must closely examine the interest rates and balances of all credit cards, and choose the card with the lowest balance/interest rate to transfer to.
Balance transfers can be tricky. If the debtor chooses a balance transfer for credit card debt consolidation, they must read their credit card statement carefully. Some credit cards offer fee waivers for “initial balance transfers” only. Every other balance transfer is subject to cash advance fees, which are extremely expensive.
Debtors who choose balance transfers for debt consolidation must also be sure to make the minimum payment on the old card while waiting for the transfer to take effect. Otherwise, a debtor may be penalized with a $29 late fee and a penalty rate, which is the last thing one needs when trying to minimize credit card debt.
The old credit card company should send a notice once debt consolidation is complete. If the debtor does not receive such a notice, one should be requested. One should be sure to take note of the name of the person with whom they spoke, the date, the time, and what was said. After receiving notice of the completion of credit card debt consolidation, the debtor should cancel their old card.
Once credit card debt consolidation has occurred, the debtor must be sure to make all payments on time. Otherwise, their 8% interest rate could jump up to 21%, or even higher.
Despite its risks, debt consolidation through balance transfers is an ideal way to minimize credit card debt.