Consolidating debt?

Hi all,

 

First post so a little.. nervous?

 

I'm just wondering your opinion on getting a new credit card and doing balance transfers in an effort to consolidate debts. I feel like the multiple payments across multiple cards is causing me more stress than a single amount and payment. It would also cut down in stress and give me less interest.

 

Thanks,
Elle

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    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 8 mths ago
    • 2
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    Welcome to the community! My personal feeling is debt consolidation can be a good thing if and only if you stop using the cards. It might seem obvious, but I've seen family members do this, only to run up the original cards again. Then, they are in more debt than they started. Ideally, you could cancel the other cards, but closing too many too fast will lower your credit score. 

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      • Elle Jay
      • Ellejay
      • 8 mths ago
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      Ben Khaki Storm I'm thinking of putting them somewhere out of the way (I have a general junk paper drawer for filing) or cutting them up. I've not used any of the cards in over 6months now so I have a general confidence in myself that I can avoid using them!!

      Reply Like 4
      • Elle Jay
      • Ellejay
      • 8 mths ago
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      Ben Khaki Storm Also - thanks!

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 8 mths ago
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      Elle Jay I've heard of people putting them in a tray of water in the freezer, of course that was before chips in the cards. 

      Reply Like 1
  • I would look closely at any balance transfer fees and interest rates on balance transfers on the new card to make sure you are actually saving interest. There are a lot of different promotional offers around balance transfers, so it's worth looking around for a good deal first.

    Reply Like 3
      • Elle Jay
      • Ellejay
      • 8 mths ago
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      adriana01 Thanks for the advice. The particular card I am looking at has no balance fees and 0% interest for 29 months which is at least 5 months more than my debt plan says I need to pay it off. My credit rating isn't the best and this seems like the most feasible option. Also it's a points card that will really benefit me to use once I've finished paying it off (for grocery etc and pay in full)

      Reply Like 1
  • Be really sure that you are ready for this.  If the spending habits that got you into this debt haven't changed, then you will end up worse off.  

    I have done this twice.  The first time, nothing changed in our habits, and the cards we consolidated got racked back up and we were way worse then we were before we consolidated.  

    I have since started YNAB, and I consolidated again, this time with a low interest loan with automatic payments.  My credit cards are tracked in YNAB and any spending on them has been already budgeted for.  This time, the debt consolidation has been a success. 

    Reply Like 6
      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 8 mths ago
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      Steel Blue Door absolutely agree! 

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      • Elle Jay
      • Ellejay
      • 8 mths ago
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      Steel Blue Door Thanks for your story. I did a balance transfer once before and then did the same with a card (it was a very low credit limit so didn't make a big difference to anything and its already paid off). I'm in a completely different place now and my budget/finances are my top priority!

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  • Can echo that I made similar mistakes to folks above (debt consolidation + re-spending on credit cards leaving me more in debt), BUT I will say that before starting YNAB, debt consolidation allowed me to avoid a LOT of interest and reduce my monthly payments.  Now with YNAB, I have a single CC that will be PIF starting next week, and the one debt consolidation loan from five years of gradual overspending.  The other credit cards do live in a drawer and are never touched. FWIW, if you think you can execute a consolidation on a 0% interest card and stick to it, do it.  Esp. when credit card interest rates are usually between 17-23%.  But if you're worried about your habits, it's dangerous. 

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