Debt is stressful, especially when you feel it slipping out of your control. Most people turn to credit card consolidation, but unfortunately, many of those people don’t realize that there is a credit card consolidation limit. Let’s examine what this phrase means in regards to your debt solution.
Your credit card consolidation limit is referring to the limit you have on the amount of debt you can consolidate.
In other words, you have the option of applying or using one of your credit cards for balance transfers. You will transfer all balances from all the credit cards you have to that one card. By doing this you consolidate your debt into one monthly payment, onto one card, and obtain one (typically lower) APR. The reason you would want to condense your debts into one would be to lower your payments and the interest you pay out.
However, the catch is that the balance you place on a credit card is limited by the credit card consolidation limit, which is the amount of the credit limit the card issuer offers.
To be more specific, if you are in financial turmoil and have four cards you can choose one card that is not maxed out and place all funds on it. This is where the bad news comes…
If you have $20,000 in debt and your credit card consolidation limit is $15,000, you will either have to keep two cards or have to seek a new credit card consolidation plan.
This is just one way of looking at credit card consolidation limit. The other option is that you use a specific credit card consolidation loan.
This loan will have a credit card consolidation limit, which is again set by the consolidation company. Typically the reason to go with a loan rather than a balance transfer is to make sure the entire debt you owe is part of the loan.
Your credit card consolidation limit may also refer to the amount of payment you can make. You will have a limit to how much you can afford for a monthly payment or a negotiated payoff. It is this amount which will determine what actions you can take in the consolidation process.
Though there are several ways that you can be affected by credit card consolidation limit, it is generally about the credit card limit a company offers you.
Remember, debt is not something you can ignore. You need to find a solution to pay down your credit cards before bankruptcy is your only action.
If you do opt for consolidation by using one credit card make sure you will not overstep the limit. You could incur fees if you also use the card for purchases.
One last tip: It is very important that if you consolidate your debt, you stop using all of your credit cards. Even if you have not maxed out the credit card consolidation limit with balance transfers you do not want to get close.
