Rossen Reports: Make this move right now to control credit card debt
We've gotten several emails recently about debt consolidation, where you roll multiple debts into a single payment.
Our viewer Tammi asked Rossen Reports, "I would like to consolidate all of my credit card debts into one payment. Do you have any advice on how to do this?"
We looked into it, and these are the two most common options available:
Option 1: Consolidate debt onto a balance transfer credit card
These typically come with a 0% APR – meaning you typically have a year, sometimes 18 months or more, to pay off your debt before you start getting hit with interest payments. There's usually a balance transfer fee of around 3% to 5% of the total amount, but that’s better than the 25% to 30% some credit cards charge if you keep rolling over the balance.
Option 2: Get a debt consolidation loan
In this case, you’ll pay back the loan in installments at a fixed rate over a set term – sometimes up to seven years. Like the balance transfer card, there’s often a fee, ranging from 1% to 8% of the total amount. If you qualify for a lower interest rate than your current credit cards, you could end up saving money in the long run and paying off your debt faster. So, if you have a lot of debt that you need time to pay off – this could be the best choice for you.
Either way, always be sure to make the minimum payment due to avoid problems with your credit score. Once that starts dropping, you have a whole new set of problems.
Have a question for Jeff Rossen? He’s answering your consumer questions every Friday in the new segment "Rossen Responds." Email your questions to him at RossenResponds@hearst.com.
