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Credit Card Debt Consolidation Testimonial
A Personal Look at Credit Card Debt Consolidation
When our tenth wedding anniversary came around, my husband James and I decided that instead of taking another vacation and running up more debt, we wanted to make a resolution to ourselves to consolidate our credit cards. We had a few cards in both our names, and each of us had a few cards of our own. Still, I was surprised to learn that we had eight between the two of us. I hadn’t realized that my husband carried an affinity card offered to members of our country club, and he hadn’t known about the one I had opened a few months back at an outdoor equipment store.
We could certainly transfer the majority of our balances to one of those zero-percent-interest introductory period cards. However, we knew that if we closed our old cards, or even if we simply paid them off and stopped using them, we would be shortening the good payment history available to the credit reporting bureaus. If our new credit card became our only open and active trade line, those bureaus would have a smaller basis on which to judge our credit worthiness.
Another option was a second mortgage, taking out a home equity loan or line of credit. This option appealed to me for several reasons, not the least of which were the lower interest rate and the tax-deductibility of any interest we would pay on the loan.
Similarly, we could look into refinancing our
home. Since we’d been making payments on our first mortgage for several years, refinancing would allow us to take cash out at closing that we could use to pay down our debt. Again, the interest we would be paying on our refinanced mortgage would be tax-deductible.
We decided on refinancing after consulting with a loan officer. It turned out that in our case, a refinance would give us a lower interest rate than if we took out a second mortgage.
We paid off and closed only a few of our cards so that we could keep several open and active trade lines with good payment histories. We paid down quite a bit of our debt and reduced the number of cards we were carrying between us to four. If we stick to our plan to keep low, manageable balances on each of those cards, our consolidation efforts will also put us on the right track to raising our credit score quite a bit.
After James sent off the last check, I reassured him we’d made the right decision to forego our vacation in favor of getting our finances in order.
“Actually,” said James, “I think we may have enough cash left over for a long weekend.” I’d been so focused on consolidating our credit card debt that I’d forgotten we could use the cash we’d taken out of our home for anything we chose.
The next day, James booked a short vacation package so we could visit friends who lived a few states away. It was nice to know that we wouldn’t need to charge the expense to our credit cards. It was even nicer to know that, thanks to our consolidation efforts, if we had needed to, we could.
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