Beware Hidden Fees When You Consolidate Credit Card Debt

Beware Hidden Fees When You Consolidate Credit Card Debt

Watch those high interest rates they can be a massive drain on your finances. If you are stuck with loans or credit cards at high rates, it can seem as though practically every cent goes to pay the interest and that the principal balance never seems to shrink. That means you may think it might be a wise move to consolidate credit card debt and reduce your annual interest rates to a figure that is more manageable. It may seem prudent to transfer a credit card with a annual percentage rate of eighteen percent to another card carrying a lower rate, such as fifteen percent. Be sure you investigate the fine print of your contract with the lower-rate card, as you may find that there are "hidden" fees when you actually do consolidate credit card debt.
What should you look out for?

Credit card companies charge a "balance transfer fee" that you will have to pay when moving the balance from your higher-rate card to the new credit card. In many cases this fee is a flat rate, one time charge of $25 or $35. However, some consumers report that they've been shocked to learn that the balance transfer fee is actually a percentage of the amount transferred, some as high as four or five percent. And don't forget when you consolidate credit card debt, these balance transfer fees are added to the new outstanding balance on the lower-rate card. That means if you don't make a payment that covers the transfer fee immediately, you'll be paying interest on top of the fee itself.

Check other "hidden" fees when you consolidate credit card debt onto a lower-rate card. If you prefer to make your payments via telephone, some card companies charge a telephone payment fee. You may be shocked to find that your old card didn't require a phone payment fee, while your new card does require a fee, sometimes as high as $12.00 per transaction. That means you'll have to adjust your preferred payment method to avoid getting stung by such a charge. Your credit card company should inform you of any convenience or payment fees that will be required before you actually complete the payment. If they don't, then make sure you ask.

We often refer to these fees as hidden, that's only because these fees may not be top of mind for the consumer when making a decision to consolidate credit card debt. You should know that the credit card companies are required to disclose fees to you before you avail yourself of their offers, so consider the details and fine print before you act.

Consolidate Credit Card Debt

Consolidate Credit Card Debt

by Stu Barnett

We know that it's good to consolidate credit card debt (at least that is what we keep hearing from everyone). In fact, the first step towards addressing the problem of credit card debt is to consolidate credit card debt. Now, what are the steps to consolidating credit card debt? Should you just go with that attractive ad in the newspaper that says '...the lowest APR in the town is available here'?

The first thing, really, is to keep your eyes and ears open. There are always a number of offers available for you to choose from. Credit card suppliers keep coming up with new and more attractive offers asking you to consolidate your credit card debt with them. However, you must note that the APR quoted in bold, e.g. 0% APR, is applicable only for a short term (3-9 months). The long term (or the standard) APR is different. So, when you go looking for a credit card to consolidate your credit card debt to, you must be aware of these 3 things (in terms of APR)-- introductory APR, introductory APR period and the standard APR. Let's see how each one is important.

Introductory APR is probably the most attractive thing to look for when you are looking to consolidate credit card debt. If you consolidate credit card debt to a card that has a low introductory APR e.g. 0%, the first thing you get is a breather/relief in terms of the rate at which your credit card debt has been growing. Based on how long that 0% APR period is (generally you will look to consolidate credit card debt with a credit card supplier who offers 0% initial APR), you will at least be able to temporarily break the growth rate of your credit card debt. The longer the introductory period, the better it is. However, you should not ignore the standard APR when you consolidate credit card debt.

Standard APR is the interest rate that will be applied to your balance after the expiry of the introductory low APR period that was given to lure you to consolidate credit card debt with that credit card supplier. If the standard APR is too high and you know that you will not be able to clear off the entire credit card debt during the low APR period, that credit card is probably not the best for you to consolidate credit card debt to. However, if you think that you will be able to clear off the entire credit card debt during that period, you can make some compromises on the standard APR of the credit card to which you consolidate credit card debt.

The card that synchronizes with your current and future financial position (and needs), is the one you should choose to consolidate credit card debt to.