Manage Your Finances With Credit Card Debt Consolidation

Growing up in Providence, Rhode Island with a single mother and two younger sisters, Seth Hoover never really knew about the finer side of life because his mom was always trying to make ends meet. At the age of 23, when Seth landed a high-paying job on Wall Street, he was thrilled at the prospect of finally having more than enough money to spend without worrying about the next bunch of bills. “I was signing up for credit cards right and left and really splashing money around,” he says today, seven years later, “buying the latest gadgets, a pricey new car and ghastly but expensive clothes.”

Inevitably, most of his purchases were credit card-driven, which is the case with a majority of Americans today. As financial consultant Joel Harris says, “Credit cards are an amazing invention, but they can also be instrumental in your financial ruin.” If you study them, the statistics can be alarming. In 2004-05, about 43% of American households with multiple credit cards were found to be carrying an average debt worth about $8,000 per household. In addition, the average American consumer has 2.7 bank credit cards and 3.8 retail credit cards, which means 6.5 credit cards per person.

In Seth’s case, he developed the fatal habit of paying only the minimum amount due on his cards, which meant that the balance amount due was added to the interest, and his debts mounted steadily over three years until he was facing prosecution. “It was the lowest I could sink,” he says. Just in time, however, his brother-in-law forced him to consider credit card debt consolidation, and life took a U-turn. “I had heard about the process of credit card debt consolidation but didn’t know the details. To me, debt consolidation seemed an inadequate solution for the mess I was in” he says.

Additionally, Seth thought credit card debt consolidation was synonymous with a debt consolidation loan, and he didn’t dare incur a new debt. Like a lot of other people, however, Seth was mistaken. Credit card debt consolidation is not the same as a credit card debt consolidation loan, not at all. Debt consolidation is a debt management technique whereby you appoint a debt repayment representative, who deals with creditors on your behalf. The principal job of these managers is to reduce the interest rates on your debts and, if possible, to also reduce or have waived the various fees and penalties. Typically, credit card companies charge interest of 12-35% approximately.

Once the final amount you have to pay is known, you begin making monthly payments that will usually allow you to eliminate your debts within a fixed time span. In effect, you have got your debt repayment representative to negotiate a lower payable amount, which means it is that much easier to meet your payment deadlines. Besides, credit card debt consolidation will also improve your payment history and enable you to live a debt-free life.