Definition of Credit Card Consolidation

What does the term "credit card consolidation" mean? What is the definition of the term "credit card consolidation"?

Credit card consolidation occurs when you take advantage of a lower interest rate on one of your credit cards and move all of your higher interest rate balances onto that card.

For instance - maybe you just signed up for a new credit card that is offering a promotional interest rate of 5.9% for the first six months. They are also going to make it very easy for you to transfer balances from other credit cards onto their card.

You make an inventory of your other balances - $4,000 at 21.9%, $5,500 at 22.5% and $1,700 at 22.9%.

Your new credit card has a limit of $20,000, so you move all of your other balances onto the new card.

This means that instead of the 21.9%, 22.5% and 22.9% interest rates, you will be paying a lower rate of 5.9% on your entire credit card debt for six months.

Ideally, in this situation, you would try to aggressively pay down your credit card debt over the six month period. That way, when your new card reverts to its standard interest rate (say, 21.9% per year), you will have a much lower balance.

Credit card consolidation also makes it much easier to track your balances. Instead of having four different cards with four different payment dates, you would only money on just a single card with a single payment date.

The one downside to credit card consolidation is that if you own a number of different balances on existing credit cards, you can often find it difficult to qualify for a low promotional rate.

If a low rate is offered to you, take it and consolidate your balances on that card.

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