Consolidated Credit Card

We consolidated our Credit Card? Can we still use our consolidated credit card?

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Bill's Answer: Answered by Mark Cappel

The answer to your question depends greatly on what you mean when you say you “consolidated” your debts. The term "debt consolidation" can be used to refer to several different debt relief options available to consumers, including debt consolidation loans, consumer credit counseling, and debt settlement programs. The impact of using credit during your consolidation depends on the type of program in which you are enrolled.

If you consolidated your debts using a debt consolidation loan, careful use of credit should not cause you any problems. A debt consolidation loan generally involves using a home equity loan to pay off all of your debts, resulting in a single debt with the same balance as your old credit cards, but with a lower interest rate. The new debt will also be secured by your home. Once you have finalized your debt consolidation loan, you are free to use credit as you wish, including making charges on the old accounts paid off using the consolidation loan. Of course, I highly discourage you from over-using credit after consolidating your bills, since you do not want to become overburdened with debt again.

If you entered into a consumer credit counseling or debt settlement program, you should avoid using unsecured credit until you complete your program. Credit counseling programs negotiate lower interest rates and monthly payments with your creditors, while debt settlement programs negotiate reduced balance settlements to decrease your debt. Since both program types ask your creditors to accept less money than they would receive if you continued making your regular payments, it is important that you include all of your accounts in these programs. If you continue making regular payments to one creditor, your other creditors could think you are "playing favorites" and be reluctant offer you any reduction in your debts.

You can keep the card you did not include in your consolidation, but use it only as a last resort. If an emergency expense arises, such as a vehicle breakdown, you should first try to borrow money from family and friends to avoid using credit. If you must use credit to pay for the repairs, you should contact your debt resolution company to discuss ways to minimize the negative impact using credit will have on your plan. You should borrow only what you truly need and pay the debt off as quickly as possible so the balance does not appear on your credit report for an extended time. In addition, I encourage you to carefully consider what constitutes a true emergency, and if the expense in question can be deferred until you have the cash to pay for it.

To learn more about the different forms of debt relief available to consumers, I encourage you to visit the Bills.com Debt Help Resources page at /debt-help/

The information on this page will help you determine which of the programs I described above applies to your situation. I hope that my response helps you Find. Learn. Save.

Best,

Bill

www.Bills.com

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