3 . Steps To Consolidating Your Credit Card Credit Card Debt for the new year

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3 Steps to Consolidate Credit Card debt at the beginning of the year
Debt consolidation consolidates multiple debts into one monthly payment with an interest rate that is lower and could help you get rid of credit card debt for the year.
By Jackie Veling Lead Writer Pay later, buy now loans as well as debt consolidation personal loans Jackie Veling writes about personal loans on behalf of NerdWallet. Her work has appeared by The Associated Press, MarketWatch, MSN, Nasdaq.com and Yahoo Finance. Prior to her work, she had an editing and writing freelance business, where she partnered with a wide range of clients which included U.S. Bank and Under Armour. Her graduation from Indiana University with a bachelor's degree in journalism.





Jan 18, 2023


Edited by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. Kim Lowe joined NerdWallet in the last 15 years, after managing content for MSN.com which included food, health and travel. Her first job was as a writer for publications which covered mortgages as well as the restaurant, supermarket and mortgage industries. Kim obtained an undergraduate degree in journalism from the University of Iowa and a Master of Business Administration from the University of Washington.







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A new year is the perfect time to start resolutions and you could be determined to take in control of your financial situation. Many of us will be eliminating high-interest credit card debt.
Credit card balances were up 15 percent in the 3rd quarter of 2022 when compared with the same period in 2021 -- the highest increase in 20 years -- according to the most recent Federal Reserve household debt and credit report. The amount of debt, while remain at historic lows, are also rising. And thanks to higher interest rates, carrying a debt is more expensive, making it easier to fall deeper into debt.
But there's a strategy which can aid. Debt consolidation, a method which combines multiple loans into one monthly installment at a lower interest rate, can be an emergency plan for those who are unable to pay off debts by making minimum payments on their own.
Follow these steps to consolidating credit card debt at the beginning of the new year.
1. Choose the best consolidator tool for your credit score and debts
Two of the most effective tools to consolidate credit card debt are the balance transfer credit card or debt consolidation loan. Both of them work by combining the debts you have already incurred into one single payment.
With a balance-transfer card, you transfer higher-interest credit card balances onto it and then pay off the debt at a lower interest rate. In addition, most balance-transfer cards have an initial promotional period of 0%, usually lasting between 15 and 21 months, in which you won't accrue interest, so you can pay off debt quicker.
Balance transfer cards sometimes charge a transfer fee -- typically 3% to 5percent of the amount transferred -- and are only available to borrowers with good credit (690 credit score or more).
A is a personal loan accessible to borrowers across the credit spectrum through online lenders, banks or credit unions. By using this loan to pay off your credit card debts You'll only have one monthly installment that is fixed over the life of the loan typically two to seven years. In addition, personal loans generally have lower rates than credit cards, so you'll still save on interest.
Tiffany Grant, an accredited financial counselor who is based in Greensboro, North Carolina, states she doesn't have any particular preference between the two options, however she recommends that clients look at credit scores.
"Because they function in the same way it's all about what you can get accepted for." Grant says. "Some people can't get approved for a 0% interest rate card, which means they need to take out a low-percent individual loan."
Plugging your balances and interest rates into one can also help you choose since it'll show the extent of your debt. For example, a balance transfer card can be a great fit only if you have an adequate credit limit to pay off the debt and to pay it off during the promotional time.
If the rate difference between the tools for consolidation and your current debt is small -- consider just a few percentage points -- it could be better to avoid consolidation and avoid the damage in your score from applying for a new credit line, says Grant. In that case, consider other .
2. Make an application to a lender and be approved
Once you've decided on the consolidation tool you want to use It's time to start applying.
Balance transfer cards as well as debt consolidation loans can be found on the internet. They may require you to provide personal information like the details of your Social Security number, address and contact information, as well as income and employment information.
If you're looking to apply to get a consolidation loan You may be able to pre-qualify this allows you to view possible loan conditions without affecting your credit score. If you're not able to pre-qualify pay special attention to the eligibility criteria on the lender's site, including an acceptable credit score.
In evaluating the application, lenders examine your credit history for timely payment, low utilization ratio and minimal credit inquiries, says Sarah DuBois, a spokesperson with Wells Fargo, which offers an account for balance transfers as well as a consolidation loan.
You can also take steps to improve your chances of being approved, says DuBois by making a loan payment on an existing balance, which reduces the amount of credit you use, or disputing an error of your credit score.
Once you have been approved, the next steps will differ based on the specific product. For instance, for a balance-transfer card, you can begin the transfer of existing debts online or over the phone with the new card issuer. The transfer process can last up to a few days up to a couple of weeks.
For the purpose of a consolidation loan you can receive the funds into your bank account, which you can use to repay your credit cards. Other lenders may send the money directly to your creditors.
Are you looking you to combine your credit card debts? See if you pre-qualify
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3. Make sure you pay your bills on time and make a plan to get out of the cycle of
While consolidation can be a smart move however, it's only effective when you settle the debt you've taken on and avoid the temptation to build up a amount on your newly-freed credit cards.
that will prioritize your next monthly payment , so you're not charged a late fee. Paying late can harm your credit score if reported to credit bureaus.
Also, think about your strategy for staying free of debt in the near future. Grant states that most of her clients aren't in trouble because of bad spending habits, but rather because they were unable to pay for unplanned expenses, like car repairs or medical bills.
Grant suggests putting aside a $1,000 emergency fund to help prevent cash shortages. Don't wait until you're out of debt to begin, she advises as unexpected expenses could appear at any time, causing you to slip backwards.
Instead, save any cash you can manage into savings account that earns interest, and still make your monthly payment.
"Maybe it will take a bit longer but you'll be able to do both, and in the majority of situations it's best," Grant says.


About the author: Jackie Veling covers personal loans for NerdWallet.







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