Is Debt Consolidation Right for Me?

Credit cards are a valuable tool for building credit, making large purchases, or earning rewards. Still, a tool this powerful must be used carefully to prevent avoidable or unmanageable amounts of debt. If you ever find yourself in deeper than expected, don’t worry – there are several ways to tackle credit card debt, one way being debt consolidation.

If your debt is spread across multiple credit cards with varying rates, that debt could potentially be consolidated on one new, lower rate card.

Some reasons to consolidate debt include:

• Easier to keep track of one monthly payment vs. many
• A lower rate saves you money by charging less interest
• Pay more towards the principal to eliminate debt faster

If your debt is only on one credit card, you can still perform a balance transfer, which is a form of debt consolidation that moves your current card balance onto a new, lower-rate card.

Credit card debt isn’t the only debt that can be consolidated. Personal loans, student loans, medical bills, store cards, and others can be combined or transferred for a new rate. Take a look at your entire financial portfolio and compare your current interest rates – you can likely save more than you realize!

The rate you receive on your new card may either last for a limited time or for the duration of the balance, so before making the transfer, you should have a payment plan in mind to take full advantage of your new rate. If the rate has a promotional period, consider making aggressive payments during that promotional rate period that can rapidly lower your balance. If the rate lasts for the duration of the balance, focus your energy on keeping that balance to a minimum and not negating the effects of paying less interest.

When going through the debt consolidation process, make sure to examine your own finances, habits, and proclivities for spending. While consolidating debt makes it easier to manage and more affordable in the long-term, it does not make that debt (or the factors that cause it) go away – only making principal payments can reduce debt!

Ask yourself the following questions before deciding if debt consolidation is right for you:

1. What is the cause? Identify the source of your debt. Is it caused by casual overspending or a lifestyle event? Is this debt avoidable in the future? Will this debt continue to grow?
2. Do I have a budget? An achievable budget can eliminate habitual spending. For unexpected expenses such as an accident or emergency, a dedicated emergency fund can help prevent unnecessary charges.
3. What is my goal? Establish a realistic timeframe for paying down your debt. If your goal is to be debt-free by a certain date, calculate the corresponding monthly payment and configure that into your budget.

^{*Introductory 0.00% APR for purchases and balances for 9 months from credit card open date. Balances and purchases are subject to standard 9.99% APR thereafter. Approval for a Platinum Preferred Mastercard depends on creditworthiness and other qualifications. Other restrictions or conditions may apply. You may not pay off your current American Heritage Credit Union credit card, loans or lines of credit by using this balance transfer or cash advance options. Offer available to all new qualified Platinum Preferred Mastercard holders. Foreign transaction fees may apply. Existing Platinum Preferred Mastercard cardholders in good standing with no outstanding balance may be eligible for 0% APR depending upon current promotional enrollments. Existing Platinum Preferred Mastercard holders may visit a branch or contact us at 215.969.0777 to learn more. American Heritage reserves the right to refuse any balance transfer request. See account Terms and Conditions for information on fees, click here.}