Damburger

Right now, I’m carrying three different credit card debts. They’re not too big and I can make the monthly payments easily enough, but I really don’t like paying so much interest - watching it eat up a chunk of every payment I make.

After doing a bit of online searching and talking to a few friends, I’ve come to the conclusion that there are two ways of cutting back on the interest I’m paying.

Number one: do a balance transfer.
Number two: get a debt consolidation loan.

Check out the forums and you’ll see there’s a lot of support for each of these options, but also a lot of people pointing out the drawbacks.

Take balance transfers. The main ‘pro’ is that you won’t pay any interest at all for a while - can be up to 15 months or so, looking at the deals available.

The main ‘con’ seems to be the charge that they’ll apply when you switch your balance like this. Having said that, I’d rather pay a one-off fee of 3% then no interest at all for 15 months - seems a lot better than paying 16% per year!

As for debt consolidation loans, you won’t find one that charges 0%, but it looks like there’s a lot of loans out there charging a lot less interest than I’m paying on my credit cards today.

The main ‘pros’ you hear about are the lower interest rates and the ability to reduce your monthly payments (something that doesn’t really ‘interest’ me - ha ha - I’d rather get rid of the debt as soon as possible, as this is the best way to make sure I’m paying as little interest as possible).

One drawback with debt consolidation, though, is that it means I’ll owe nothing at all on my credit cards - basically ‘freeing them up’. I’ve read quite a few stories about people who consolidate their debts then go on to rack up fresh debts on their cards, ending up deeper in debt than they were before they took out their new loan! I’m pretty sure I could resist the temptation, but it’s still something I’d need to keep in mind.

Of course, the main thing to realise is that neither balance transfers nor debt consolidation will actually reduce the amount of debt I’ve got - but that’s not really the issue that worries me. The main thing I want to do is cut the interest I’m paying, and it looks like either approach could do that nicely. Time to decide…