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13 August 2007
Every year many consumers decide to consolidate a number of debts through the use of a loan, and amongst the most popular debts that many consumers decide to consolidate are credit card balances.
For those with good credit there are a number of options available to help get rid of expensive credit card balances on high interest cards, and one of the most popular is to transfer these balances onto a 0% balance transfer credit card, which allows you to enjoy a period of time where you can pay off the balance without incurring any interest charges, thus speeding up the time it takes you to clear your credit cards debts and saving you a fortune in interest.
However, there is not as much choice available for those with a poor credit history, and for those with a number of credit cards that charge high levels of interest the only option available is usually a consolidation loan, which will enable the borrower to pay off these credit card balances and eliminate these high interest debts.
Recent research has shown, however, that many consumers that pay off their credit card accounts using a consolidation loan then go on to run up balances on the cards again in next to no time, and this means that they then have a loan and the credit card balances to deal with, putting them in an even worse situation than before.
Experts are now urging consumers that are planning to pay off their credit card balances through consolidation to make sure that they do not hang on to the cards, and even to go a step further than simply cutting up the cards. By doing this the consumer can easily re-order the card as and when necessary and can then go on to run up a balance on the card again.
However, by contacting the credit card company and actually cancelling the account the cardholder reduces the risk of getting into further debt.
Experts do recommend that the borrower hangs on to one card, preferably with a low credit limit, so that there is something there for emergencies but not enough of a credit limit to result in unmanageable debt levels.
One woman who paid off her cards described how she felt when, after just a month, she had run the balances back up again. "I was devastated – I thought that through consolidation I had managed to leave my credit card debts behind, but I hung on to the cards and before I knew it I had maxed them all out again."
 Credit card guide
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