Consolidate Credit Cards Into One Payment
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How to consolidate credit cards

As you take a look around your house, you see several credit card statements. You wonder how you got into this position. You hate writing several checks every month, and you're sick of all of the interest charges. The last thing you really want to do is sit down and go through all of this paperwork, but you do have a strong desire to get out of debt. One of the best ways to simplify your financial situation and pay off your credit cards is to consolidate.

1) Gather up all of your statements

The first step in the consolidation process is to gather up all of your credit card information. You'll need your credit card statements, mostly, but it wouldn't hurt to get out your budget (or create one). Add up all of your debt and write this number down. Then, write down all of the various interest rates for all of your credit cards. Average them together and write down the average interest rate. This will give you an idea of what your overall interest rate is. Finally, write down your total monthly payment between all of your cards.

2) Call your bank and several competitors

Contact your bank and tell them you're looking to consolidate all of your credit cards. If you have a good relationship with your banker, he should be willing to help you or point you in the right direction. You'll want to explore either a HELOC (home equity loan), a personal consolidation loan, or a cash-out refinance on your existing mortgage.

Don't just get information and an application from your current bank though. Talk to several banks. While your bank might be able and willing to help you, there's always the possibility that another bank can and will do something for you that your bank won't, for whatever reason.

3) Explore Balance Transfers

One option you should not ignore is a balance transfer. Credit card companies sometimes allow you to transfer the balance of all of your existing cards onto a new card at a very low - even zero - percent interest rate. This is an excellent option since you get to pay off your debt, get a new credit card, and you escape the high-interest charges of personal loans, HELOCs, and your former credit cards.

While transferring the balance to a credit card means you're trading several cards for another one, having a credit card isn't really the problem. Having too much debt, and a bad relationship with debt is the problem. Credit cards can potentially be part of the solution, since all you really need to care about is the interest rate and monthly payment on the new card.

4) Make a Decision

Eventually, you're going to have to make a decision. Mostly, it comes back to numbers. The consolidation loan has to have a lower average interest rate, lower total monthly payment, and must have payment terms you can live with. Once you've made a decision, apply for a consolidation loan with your chosen lender or credit card company.

5) Educate Yourself

Going forward, there's no substitute for education. One of the most common reasons for getting into debt - and having that debt become a burden - is a lack of savings discipline or an improper attitude towards budgeting. You're an honest, decent person, and you deserve more than a lifetime of debt (or a vicious cycle of loan consolidations and repayment plans). Consider hiring a credit counseling organization to teach you more about creating a budget that works for you, help you improve basic money management skills, and develop a healthier relationship with debt and credit.