The total credit card debt in September 2021 is $1,037,392. (source: debt clock). The clock is ticking, and the average credit card debt per citizen is increasing with each passing minute. The average credit card balance is $6243 per individual.

Credit card debt consolidation is an effective way to solve financial problems. This credit card debt relief option helps you combine different credit card accounts with various due dates into one payment. When you’re researching credit card consolidation programs, make sure you choose one that helps lower your monthly payment.

When you can pay one bill every month

When you want to save money with a reduced interest rate

When you want to avoid late fees, fines, and penalties

When you want to avoid collection calls and lawsuits

When you can’t pay one bill every month

When you have secured debts

When you can’t live a frugal life

When you can’t take the advice of the credit card consolidation companies

Check if the company has an affordable fee structure and good industry experience.

Read the online credit consolidation reviews.

Ask the company how they will combine debt into one payment.

Ask them if you will get any legal advice if creditors sue you.

Ask them if they follow the FTC laws for eliminating credit card debts.

Ask various questions about credit card consolidation programs and see if they can give valid answers.

When your credit score is good, you can apply for a balance transfer card. This card comes with a 0% introductory APR. So, if you transfer your credit card balance to it, you won’t have to pay interest during the introductory period. (That is why it’s also called 0% intro APR credit card.)

What to keep in mind

You have to pay off the entire balance within the introductory period. If you don’t, you will pay high interest on them. So, you have to set a clear payoff date.

Creditors will do a hard inquiry on your credit report so they can decide if you’re eligible for their best balance transfer card.

You will get the best credit card only if you have a good credit score.

You will have to pay a balance transfer fee on the total amount transferred.

It is best to transfer the balance from credit cards with high interest rates to reap the maximum benefit.

One reason debt consolidation for credit cards is good is because it doesn’t hurt your FICO score. With this plan, you’re paying the full amount at a low interest. Hence, your FICO score doesn’t fall.

However, if you take out a personal loan to consolidate credit card debt, your FICO score may drop initially. When you apply for a personal loan, it triggers a hard inquiry in your credit report, which hurts your FICO score. Once you take out the loan, you’re supposed to make monthly payments. If you can’t, then late payments are recorded on your credit report, which pulls down your FICO score.

The simplest way to use debt consolidation programs without affecting credit is to make payments on time.

You can get a loan from various sources. Personal loans can be obtained within one business day from your friends or a credit union. You can get a debt consolidation loan from peer-to-peer lenders, banks, and financial institutions. However, the best way to get a debt consolidation loan is to knock on the doors of the peer-to-peer lenders, as they offer competitive rates. You can also borrow a home equity loan to repay your bills, since they offer the lowest interest rate. But, remember: a home equity loan is a secured debt. You can lose your house in the event of loan default.

What to keep in mind

You will qualify for the best debt consolidation loans only with a good credit score.

If your credit score is below 600, you will qualify for a credit card consolidation at a higher interest rate.

You should always compare personal loan rates to find the best deal.

Credit card consolidation is not a good credit card relief option for seniors since it will impose a new financial burden on them.

Usually, when you participate in a credit card consolidation plan, creditors freeze your accounts so that you can’t make further transactions and incur new debt. They are already lowering your interest rate, so you should be grateful to them for that.

Your goal is not to increase your debt, but to reduce your dependency on credit cards with good money management tactics. So, instead of thinking about new credit cards, learn how to live within your means with a budget.

You won’t lose your house for not making payments to your creditors. The reason is simple. Credit cards are unsecured debts. Creditors can only impose a lien on your home after obtaining a judgment against you from the court.

Credit card debt settlement:

Debt negotiators ask you to save a particular amount in an escrow account (usually known as a trust account) every month to accumulate enough money for settling credit card debt. Once you have saved a specific amount, they will start the credit card settlement process immediately. They will ask your creditors to lower your payoff amount in exchange for a lump sum settlement. They will call creditors and negotiate until they agree to reduce your outstanding balance and waive late fees. Once they agree, debt negotiators will ask you to pay off the amount agreed upon and complete the credit card settlement process.

Debt management plan:

Nonprofit credit counseling agencies usually offer this credit card debt relief option to individuals who can’t manage credit cards with simple money management techniques. Here you get a smart budget plan from the counselors who negotiate with your creditors for a lower interest rate on your credit cards and a smart repayment plan. Once they convince creditors to reduce interest rates, you can start paying off credit cards at the new interest rates.

Bankruptcy:

This is the best way to pay off credit card debt when your creditors are not ready to help you. Depending on your financial situation, you can file Chapter 7 or Chapter 13 bankruptcy to pay back your creditors. The U.S. trustee negotiates with your creditors, sells your non-exempt assets within 3-4 months, and disburses payments among them in Chapter 7. However, in Chapter 13 bankruptcy, the scenario is entirely different. Here the bankruptcy trustee gives you the option of paying off credit cards for 3-5 years through a court-approved payment plan.