If you have balances on more than one credit card, it’s quite possible that you’ve considered credit card debt consolidation as a valid option. If you have more than one credit card and they all have balances, you’re going to have to pay multiple monthly bills, which can get confusing at times.

Plus, some of your credit cards might have higher interest rates than the others, so it would make sense to consolidate everything together at a lower interest rate.

Before consolidating, please consider three points that we’d like to share with you right now. 

1. Credit Card Debt Consolidation Isn’t Right for Everyone

You may be wondering if credit card consolidation is the right decision for you. To help you figure this out, we’d like you to answer a few questions first.

How much credit card debt do you currently have?

How much can you realistically pay toward your credit card bill every month?

How long is the low APR introductory window available?

When you answer these questions honestly, you’ll be able to determine if consolidation is the right choice for you.

If the low APR is only going to last for six months, as an example, and then the interest rate will skyrocket, you better be able to pay off the entirety of your debt within that timeframe in order to make this worthwhile.

According to Consolidated Credit, a website known to compare credit card consolidation companies, “If you have several credit cards with balances and high interest rates, you may be able to find a loan or consolidation card with a lower interest rate.”

So keep this in mind when considering if consolidation is the right move for you.

2. Balance Transfers Have a Direct Impact on Your Credit Score

When you consolidate your credit cards, you will have an opportunity to leverage a low balance card transfer offers.

While there’s absolutely nothing wrong with doing this on the surface since you’re looking to save money on interest, you also have to realize that it’s going to have an impact on your credit score.

Remember, your FICO score is impacted when you utilize 30% or more of your available credit card balance on a particular card. As an example, let’s say you intend to consolidate five credit cards into one.

After you transfer all of your balances to the single card, you’ll owe that particular credit card company $5000 out of an available $6000 credit limit.

Do you see the problem here?

In this scenario, your debt to credit ratio is over 80% and much higher than the 30% threshold that will have a major impact on your score. If you are going to do this, please know that your credit score is going to take a hit. If you don’t plan to buy a house, a car, or make any other big purchase using credit at the time, then it might be worth it to suffer the loss in credit score.

On the other hand, if you are going to make a large purchase at some point in the immediate future, you may want to work on paying off as many cards as you can, getting their debt to credit ratio’s below 30%, and then apply for your new loan. If you handle it this way, your credit score should end up going up and you’ll look like a much better credit risk in this scenario.

3. 0% APR Is Not Necessarily Free

If you are transferring your balances to a 0% APR card, please keep in mind that you’ll typically have to pay a balance transfer fee in the amount of 2% to 5% for each balance transferred to the card.

For the most part, even though you do have to pay an upfront cost, you’ll typically save on interest over the long term so it’s usually worth it.

Conclusion

Please keep these three points in mind if you are considering credit card debt consolidation.

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