The average Canadian household has credit card balances in excess of $8,000 and is paying interest rates of 19.99% or more, which translates to $1,600 per year in interest alone. If you have debt from multiple credit cards, you can consolidate debt into one or a few credit cards to reduce the number of monthly bills to pay
Talk to a credit counselor to help you determine the debt consolidation method that best works for you. However, note that not all credit counselors have your best interest at heart, even non-profit counselors. Some of the things to consider when searching for a reputable non-profit credit counselling organization include a willingness to send free information without asking you to share details of your situation, licensing to offer the services, and whether other services are offered (such as savings debt management classes).
To determine if credit card consolidation is the right option, there are several things to consider:
Debt consolidation using a credit card is a good option if you cannot find a lender to give you a debt consolidation loan. Once you have a single credit card, you could then beat the banking sector in its own game by going for a 0% balance transfer credit card. This allows you to transfer your store card and high-interest rate credit card to a balance transfer credit card that attracts a low interest rate of between 0% and 2.99%. With most lenders, the interest-free grace period is usually spread between 12 and 40 months.
When you do credit card balance transfer from one provider to the next, the new provider will charge a fee for this service. This is usually a percentage of the amount you want to transfer. This transfer fee is between 2% and 5% with most lenders.
Not paying interest on your credit card debt means you will clear the debt sooner. Note that even when the grace period ends, you will have paid off a substantial portion of the debt and you will be able to pay the rest more comfortably.
The law only obliges lenders to give 51% of applicants their advertised promotional. If the lender decides they do not want many applicants, you may still fail to get the low promotional interest rate.
Note that with some lenders, the low introductory APR might only apply to balance transfers. This means if you make a new purchase, you may be charged the standard APR, which is usually very high. This is, therefore, a good option if your sole aim is debt consolidation (and not getting a new credit card debt).
Lenders offer low promotional interest rates from time to time to encourage defaulters to pay off their credit card debts. Take advantage of these low promotional interest rates to do the consolidation.