debt

Debt consolidation: zero percent offers

Seeking quick solutions to debt woes, borrowers often look to debt consolidation via zero percent credit cards. Before you convince yourself that credit card debt consolidation is the answer to your problems, consider these pros and cons.

Great zero percent offers -- or are they?

Zero percent APR credit card offers probably sound way better than the double-digit rates you might be currently paying. If your credit report is awful, it's unlikely that you will qualify for this introductory rate in the first place. If you do qualify, though, there are pros and cons to consider when putting credit card debt onto one card.

Pros of the zero percent credit card

During the introductory period, you save significantly, especially if you previously carried balances on multiple cards. These savings can help you pay down the debt faster and, it is hoped, end your debt quickly. In addition, dialing down to one payment minimizes the risk of missing a payment or falling behind.

Cons of the zero percent credit card

It is best to pay off most -- if not all -- of the balance after the switch, which can be difficult or impossible during a short time frame. If you can't pay off the entire balance within the zero percent period, you're probably going to be paying a radically higher interest rate afterward. Opening new credit cards every six months to get the zero percent rate can damage your credit and might put you in a worse spot than before. If you make late payments, don't expect the zero percent APR to be around for long either. A zero percent card should never be used to simply run up more debt. Also, watch out for hidden fees.

Is it right for you?

If you believe you can pay off the entire debt within the initial offer period, transferring your balances to the new card could be a great solution. It's a short-term boost that allows you to save money and to make noticeable progress, fueling your desire to be debt-free. If you plan to only pay the minimum payments, make additional charges on the credit card and continue the debt spiral, however, credit card debt consolidation should be avoided. You can use the Bankrate.com debt consolidation calculator to see if you can manage to meet the payoff target with a zero percent credit card.

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