Credit Tips: How to Consolidate Credit Cards?

Written by carnold
Posted On: February 1, 2006

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Posted: Fri Jan 07, 2005 2:24 pm
Post subject: How to Consolidate Credit Cards?
steve
Date: 10/5/2000 3:05 pm CDT

This past june I graduated from a top MBA program and am now working. During my two year period at school, I encountered significant expenses and had no income. As such, I accumulated significant credit card balances. Basically, I have five cards which are all pretty much maxed out with total outstanding balances approaching 40K. My interest rates are exhorbinant with the average rate around 20%. I have an excellent job which pays well, however, with all my current expenses along with my school loan payments and credit card minimum payments, I am just barely getting buy. Because of my high debt, it seems though other credit card companies don’t send me offers with lower rates under which I could transfer balances. I need to get my interest rates down which in turn should help me bring down my minimum payments for now. I have been considering either 1) a debt consolidation program where you make one payment a month to a consolidating company who has negotiated lower interest rates with the credit card companies and after receipt of your payment pays all your credit card companies at a predetermined level. However, I’m sure if these organizations are trustworthy and I have heard mixed things regarding how such a program is reflected on your credit report (I have great credit with the exception of my high balances so I don’t want to damage that). I am also condiering a personal unsecured loan up to $25k to pay of a larger portion of my debt at a lower rate and deal with the remaining 15k on my own. Does anyone have any advice regarding my two potential approaches or suggestions which could help me in other ways to lower my payments, interest rates, etc. I have tried talking to some of my credit card companies directly to get my rates lowered and they say that have rules which will not allow them offer a lower rate (for instance, if I was four or five days late on a payment two or three times in the last year, they say they cannot help me and I need to wait at least six months of totally on time payments before they will even consider). Feeling frustrated. Thanks

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Posted: Fri Jan 07, 2005 2:25 pm
Post subject: How to Consolidate Credit Cards?

dave
Date: 10/5/2000 5:08 pm CDT

I think that your second approach is better. Get the consolidation loan and work on the the 15K after that. I would pay down my highest interest card(s) first and then the others. I would not close any accounts after they are paid down or reach a -0- balance because you want to establish a good balance to limit ratio. Once the ratio improves (say less than 50%), the offers will pour in and the process will become much less painful. This will also give you leverage to negotiate with your current companies about rates. I would forget the debt negotiators because they are likely to harm your credit even if you find one that is reputable. Of course, making minimum payments on credit cards is treading water. You definitely need to figure a way to boost the payments so that interest does not eat you alive. Minimize charging anything new on the cards until this situation is under control. If you do, make sure that whatever you charged will be paid back in full plus whatever payment you have decided to make that month. Austere budget controls may be required for a while. Once you begin to make headway, you will start to feel more in control of the situation and that frustration will disappear. $40K can be dealt with.