The Best Credit Cards to Consolidate Bills

Credit card consolidation usually comes with higher interest rates.

Using a credit card to consolidate debt should only be done after carefully considering the pros and cons of the offer. Always look at the terms and conditions of any credit card offer, paying special attention to interest rate terms and transfer fees. Talk to a financial adviser or debt counselor if you need help determining your options for debt.

Credit Card Consolidation

Using a credit card to consolidate other credit card debts is accomplished through a balance transfer. When you transfer a balance from other cards to a new card, you authorize the new card to pay the old cards the amount you currently owe. You effectively use the new card as a loan to pay off your old debts. This way, each of the cards you pay off has the amount of debt transferred to the new card, and this consolidates your debts on a single card.

Consolidation Interest

Credit card balance transfer offers typically come with enticing introductory interest rates. These rates are usually much lower than the amount of interest charged to purchases, and can be as low as 0 percent. However, introductory offer usually come for only a limited amount of time, and once that time period ends, a much higher interest rate is applied to the card.

Purchases

Even if you get a credit card with a low balance transfer rate, your card may still charge you a higher interest rate during the introductory period. Many introductory rates do not include purchases made after the balance transfer as part of the low rate. For example, if you transfer two balances with a total of $4,000 in debt and have a 0 percent interest rate, any new purchases you make with the card after the transfer are charged the card's normal interest rate, not 0 percent.

Transfer Fees

Balance transfer offers often come with transfer fees. These fees are not considered interest charges but are a flat fee applied to any balance transferred. For example, if you transfer $5,000 with a balance transfer that has a no-interest introductory rate and a 5 percent transfer fee, you have to pay $250 to transfer the funds. This means you'll have an opening balance on the card of $5,250, not $5,000.

References

• Federal Trade Commission: Knee Deep in Debt
• Bankrate: Step Slowly Onto the Balance-transfer Bandwagon; Lucy Lazarony