How many credit card bills do you get each month? If you’re like many people, probably at least a few. Whether you pay them online or by mailing out a check, it can take a lot of time to manage multiple accounts. Credit card consolidation might be one way to simplify that financial landscape, but there are some important questions worth asking before you decide.
Q: What is credit card consolidation?
A: It’s all about streamlining. Basically, if you’re currently making payments on several credit cards each month, you may be able to combine them into a single credit card with one monthly payment.
Q: Why do people consolidate their credit cards?
A: In addition to helping make bill paying simpler, credit card consolidation might also help you take advantage of a lower interest rate. Some credit card companies offer low introductory rates for transferring balances, which might help you lower your monthly payments.
Q: What do balance transfers have to do with it?
A: A balance transfer is the process of moving a balance (how much you owe) from one credit card to another during credit card consolidation. Be sure to check with your credit card company to see if there’s a fee for transferring a balance or other impacts to your account, including how a balance transfer might change the way you pay interest on new purchases.
Q: Are there risks to consolidating credit cards?
A: Yes. A potential balance transfer fee could end up costing you more than you save, even if you get a new rate that’s lower than your old one. And watch out for companies that advertise debt consolidation services—be sure to read the fine print and get all the details on their offers.
Q: Will credit card consolidation impact my credit?
A: If you’re able to lower your rates or your payments by consolidating, you may be able to pay more of your balance each month, which can be one good way to improve your credit. But it’s important to know that opening a new credit card account to transfer a balance does create a “hard inquiry” on your credit report, which might lower your score a little. Consider talking to a qualified professional about your options.
Find out more
While credit card consolidation might have benefits for people with multiple credit card balances, there are things to watch out for as well. Doing your homework before making this kind of decision is important—a good place to start is by learning more about the details of credit card balance transfers.