I hear a lot about credit card debt consolidation on the radio, but I also hear that these are usually not good to take on. Should I consider these programs? What should I be aware of, or look for?
"Without having more details about the specific programs you mention, and without knowing more about your financial profile, it would be difficult to determine whether or not one of these programs would be appropriate for you," said FPA member Jennie Fierstein, CFP®, of J. Fierstein Financial Advisors.
Fierston suggests that you ask the following questions about the terms of those programs:
- What rate will they be charging vs. the credit card company?
- Will you be tied in for a given period of time vs. the flexibility of the credit card company?
In addition, Fierston said you should calculate and compare what total costs would be, for each option, until your debts are satisfied.
"The advantage of consolidating helps with better debt management," said Fierstein. "If you decide to do this on your own, try to pay off the credit cards with the highest interest rates first. Consider aggregating outstanding debt to one credit card with the lowest interest rate, and be disciplined with your debt reduction plan."