Debt Free Journey

Helping you make sense of your money

Well yes and no. It really depends on your situation. Debt consolidation with credit cards can be very risky. If you do not know what you are doing, you may end up getting your self into even deeper trouble!

Let’s take a look at a couple of scenarios.

Matt and Ashley are in a little bit of trouble. They ended up with a couple of high interest loans all of a sudden. They have been offered a credit card that will allow them to consolidate all of those bills, and put them on the card, interest free for a year. They know that they can discipline themselves enough to pay it off well within the year. They have a tax refund coming and they are both getting raises in a few months. This is a winner for them. Assuming that they are in fact as disciplined as they think and they they are well aware of the risks. They have to insure that they know the outcome if they do not pay it off. They must know the interest rate that will occur when the year is up. Well they did it. The loans and credit cards were all paid off and their credit score has increased. Now they can start putting some money away for a rainy day and the future!

Mike and Debbie are in the same boat. They like to party and travel with the high rollers. They just started taking a look at their situation. They decide that they can discipline themselves and decide to go the same route as Matt and Ashley. A month later some friends want them to go on a weekend getaway. They decide that it is OK because they will not spend much. And they will only be 1 month behind. When they get there they run out of cash trying to keep up with their friends. So they decide to just charge a couple of things on their new card. Well things add up very fast when you charge them while you are having fun! Let’s try not to forget that lesson. Anyway Mike and Debbie repeat this behavior pattern a few more times before they realize that they will not reach their goal. At the end they owed twice as much and the interest rate was 5% higher. This turned out to be a real loser for them. They will probably end up paying the minimum payment and never pay it off.

Debt consolidation with credit cards is rarely a good plan. If you decide to go this route make sure that you have plenty of cushion for mistakes. And do not try this if you have not already proven that you are very well disciplined!

To compare credit cards from various banks got to Credit Land. Make sure that the card you are carrying is right for you!