How do I go about consolidating my credit card debt?
I have a good credit score, last time I checked about 6 months ago it was about 720-730. Recently I have acquired a big credit card debt, about ,000 on one credit card (with a limit of ,000) and about ,000 on another one (with a limit of ,000) for many different personal reasons. After the whole spending money ordeal was over, I was left with all this debt on my credit cards. Since then, I have cut back on all unnecessary spending, besides the obvious things like food, gas, etc. I have never been late on payments and have never been over the credit limit. I Also try to pay an extra hundred bucks on top of the minimum payment due when I can. Are there any good ideas on how to consolidate these two credit card debts and help me out with all this? Thanks!
First of all, consolidating the debts wont really change anything. In fact may adversely affect your credit score.
You need to do the following:
1. Evaluate you interest rates. If you are paying more than 12%, then think about finding a new credit source to consolidate. With your credit score you are probably getting teaser rate offers in the mail. (Beware of a teaser rate that rests after 6 months, as what you save wont be that much) Look for a credit card that will allow you transfer the balances for a long period at a low rate. Many cards offer rates of 5.99 or less for up to 2 years, but also check if there is a transfer fee. This can be as much as 4%)
2. If you find a good card and rate to transfer, then transfer as much as you can from the higher of the two rates you currently have. If you able to transfer all of 3000 debt, do not cancel that card. (Just make sure you dont use it) Having a zero balance and available credit actually improves your credit score.
3. Make a plan. Figure out how long it will take to pay off each card by taking the minimum payment amount (principal only, not interest) and divide into the amount owed. Lets say on the 10,000 card the principal payment is $277, that means it will take 3 years to pay off that card.
4. If both cards have the same rate of interest, but different pyoff dates, put all your extra monthly payment towards the card with the highest % to the credit line (in this case the 9,000 card as that is at 90% of your limit, vs the 3,000 which is at 60% of your limit). The lower the % owed the better for your credit score.
Finally, do not use the cards. Pay cash for everything. (This is very important if you end up consolidating to a lower interest card. Those cards will apply all of your payments to the low interest balance first, and start accruing a high rate on the new purchases. that will go on until the original amount is paid off).