Credit cards have become a way of life for most individuals and families. The convenience of credit cards has led to their increased usage and with that increasing credit card debt. The statistics on the average credit card debt held by consumers is staggering at nearly $9000 by the average American said the Consumer Federation of America in a recent report. Credit card debt is not simply a problem because of the average amount owed, but also because of the interest rate charged, which only increases the amount of debt and makes it much more difficult to pay off. If you were to pay just the monthly minimum on $9000 of credit card debt at 18% interest, it would take approximately 42 years to pay off that debt. That's a long time to pay for that new television you so desperately wanted and probably don't have after 42 years.

With increased credit card debt, many of us are threatened by surmounting debt issues and many of us are looking for solutions besides bankruptcy since in 2047 we probably don't want to be paying for that now obsolete and probably non-existent television we bought way back in 2005. One possible solution is debt consolidation.

How can debt consolidation help with credit card debts?

While there are several ways to go about debt consolidation, if you are not quite in a position where you need a debt counselor and debt management plan and your credit is still in good shape, you may be able to consolidate your credit card debt with a bank loan or transfer your credit card debt to a lower interest credit card. The benefit of both is that you only have one monthly payment to make and the interest rate is usually substantially lower. If you transfer your debt to a lower interest credit card, you need to exercise some caution, though. Some credit cards offer special interest rates when you do a balance transfer, but this lower interest rate may not always be fixed until you pay off the debt. It may only last a few months and then the rate goes right back up. If you go this route, managing your debt may be easier than if you have to pay to several lenders, but much more difficult than if you were to consolidate with a single loan because you need to continually calculate interest rates and how they will affect your credit card debt.

Here's an example of how obtaining a lower interest consolidation loan or transferring to a lower interest credit card can affect your credit card debt:

Let's say you have $1000 in outstanding credit card debt with an average (APR) of 18%. If the outstanding balance remains at $1000, over the course of a year you would pay approximately $180 in interest charges alone. If you consolidate your credit card debt into a single loan with a lower interest rate or if you do a balance transfer onto a credit card with a low interest rate you would save a significant amount of money.

If the new loan or credit card have a 9% APR, the amount you pay in interest charges would be half of the higher interest cards meaning you would save roughly $90 in interest charges over the course of that same year. If you save $90 for a debt of $1000, then think about a debt of $10,000. You will save about $900 just in interest alone and pay down the debt that much quicker.