- Consumers use three types of credit card consolidation: transferring balances onto a low interest credit account, taking out a lower interest personal loan or applying for a home equity loan and profiting from associated tax advantages.
- Debtors rid themselves of revolving debt with compounding interest in favor of lower interest debt that may be repaid more quickly.
- Credit card consolidation lowers the monthly budget line item devoted to this debt repayment, while at the same time accelerating the payoff time.
- Borrowers who see their credit card balances paid off may be tempted to begin using their cards again and run up their balances; stop using the paid off credit cards immediately.
- Debtors must strive to pay off the outstanding balance of the consolidated credit card debt at an accelerated rate, preventing the cost of the credit to nullify the benefits of the consolidation.
- Credit card consolidation has the potential of decreasing a consumer's debt-to-income ratio at a quick pace, resulting in a more favorable credit rating and subsequent eligibility for lower interest mortgage or car loans.
