Another way is to go for balance transfer where you transfer funds from your account into another credit card, especially the one with a low APR to lessen the burden of paying for cards with high APRs.
However, not all people think of transferring balance into another card as a solution. Some think that getting a loan to pay off other existing debts as an ideal solution. To put simply, this is the process of applying for a low interest loan from a bank or any financial institution to pay off your debts from credit card companies with high interest rates. To look at it plainly, it is just based on the same principle as transferring your balance from one account to another.
A credit card debt consolidation loan, however, has to be paid back in monthly installments according to the terms and conditions you agreed upon with the bank or financial institution when you applied for the loan. In other words, this is an unsecured loan where the company or financial institution you got the loan from does not require you to pledge any security in any form.
However, people with a bad credit history and low credit rating still have another option. They can avail of the credit card debt consolidation loan and use this for credit card debt settlement. In this case, the customer will be required to pledge a security like your house or any other thing that has a high value comparable to your consolidation loan amount.
This is what the bank or financing institution would have as a security or hold over you. This also means that if your credit rating is really that bad, you will not have an easy time getting any loans at all. This should be an eye opener for card holders that a good credit history and a good credit rating are important because it will follow you and haunt your future transactions. If you smear your credit history, you will feel its effects in the future.
Other solutions are good as long as you can haul yourself from the pit of debts you have been buried in, but for some, getting a credit card debt consolidation loan to pay off all your other debts is the best solution.
This is because you have to close all your other existing credit card accounts, a way of forcing yourself to cut your spending habits and think wisely before you spend another cent or dime. However, whatever way you resort to, either by applying for a credit card debt consolidation loan or opting for balance transfers, the choice is up to you. Do what you think fit your lifestyle best.
If you are considering applying for a credit card there are a number of factors that you should take into consideration. Firstly, it is vital that you examine your current lifestyle compared to the benefits that you will receive from any card. You will need to compare your current salary, or income, with the credit limit alongside any other benefits offered by the card company. Of course credit card needs will vary dependant on specific individual circumstances. Also your circumstances will be taken into account when applying for cards, and will affect the bonuses that you may be entitled to. For example, if you are not in regular employment, you may not be entitled to some of the advantages usually available.
One of the best methods to use when conducting your initial research into each of the major credit card such as Virgin, Barclaycard or Egg is look around on the internet at independent financial sites like motleyfool.co.uk. Offering just the facts behind each of the introductory offers and helpful reviews on each card, these sites are useful whether you are choosing either your first or simply a new credit card.
Where to find independent advice? There are many independent financial communities online that compare all of the leading products in each credit card range, and lay out the bare facts for you on screen. Using these comparison sites will help you to determine which card is most suited to your individual needs as well as providing customer feedback for you to browse. A good example of this type of website is motleyfool.co.uk, which provides all of the details mentioned above although there are many more to choose from.
If this is your first application for a credit card this is the golden rule of how to make credit cards work for you. If you've never had a credit card before remember it's always better to spend a little often and pay even slightly over the minimum to improve your rating credit rating companies such as Experian don't look at how much you pay, but assess how you use your card to purchase goods and since any reward programme is dictated by the card company, none of whom reward - either with bonuses or points- any customer who only pays the minimum every month. Although this method of paying off the loan is only extending the length of time it takes you to pay off your debt and is a costly way of borrowing money, and as such means you pay more on the initial loan, you still won't qualify for any bonuses for paying this way or even improve your credit rating.
Many credit cards offer a 0% period on such things as balance transfers and purchases. Customers have taken to changing credit cards at the end of the special offer and subsequently taking advantage of the introductory period offer on the new card. A few years ago this 'card hopping' was a good idea; unfortunately credit card companies have take action to prevent this. Swapping cards immediately after the benefit period expires will have a negative effect on your credit rating. In order for this to not be the case you will have to wait for a period of time before applying for a new card.
The rate of APR is also one of the most important things to consider when applying for a credit card. The rate of APR will come into effect once the 0% period is at an end. You will need to think carefully about whether the rate of APR is reasonable in comparison to the benefits you receive once the introductory 0% is over. Credits cards with no introductory offer and fewer benefits will have a lower rate of APR, which is another thing to consider before making a choice. It could be better to take a card with fewer benefits so that you can manage the lower repayments.
Both Peter Finch & Sam Evans are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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