A credit card is an extremely common way to secure an emergency source of cash, earn miles for travel, or build credit for future purchases, including a car or home. However, nothing’s more stressful than getting stuck with multiple credit cards with varying balances and added pressure from collectors. In such cases, it’s best to refinance credit debts. Although refinancing to pay off debt won’t instantly solve your problems, it ensures you’re well on your way to becoming debt-free. Let’s take a closer look at the benefits this strategy offers.
Benefits of Refinancing Credit Card Debt
It Helps Save Money and Pay Off Debt Faster
Credit card companies change an account’s interest rate and fees very quickly and the primary cardholder is usually already paying the rate before they notice or can do anything about it. Essentially, left in the dark, cardholders are usually surprised about higher interest rates and added fees. As a result, they usually pay more for their card than they originally expected. In some cases, they could pay thousands of dollars more over the years.
Refinancing allows credit card users to steer clear of these surprise increases in fees and interest rates. This strategy helps cardholders save more money and pay off their credit card debts faster.
It Lowers Interest Rates
Did you know that credit card debt is usually designed to keep interest rates inflated? Most people don’t realize that refinancing their credit cards can significantly reduce their overall interest rate. Furthermore, credit card refinance allows consumers to consolidate multiple debts onto one card or onto one repayment plan, saving consumers a ton of money and years of debt payments.
It Boosts Your Credit Score
A credit score refers to a numerical rating based on information from a person’s payment history, credit utilization, length of credit history, types of credits used, and recent credit inquiries. Furthermore, lenders use it to determine the risk of lending money to a borrower. Higher credit scores indicate a good credit history and lower risk to lenders. In other words, a person’s credit score represents their creditworthiness.
Refinancing credit card debt could improve a person’s credit score by lowering credit utilization.
Credit utilization is a major factor in determining credit scores because it’s the amount of credit used compared to the amount of credit available. Refinancing and paying off credit card balances improves credit scores over time by reducing the credit utilization ratio.
Moreover, refinancing credit card debt with a monthly fixed payment makes it easier to budget for payments. Additionally, consolidating credit card balances into one balance transfer, credit card, or loan reduces the number of open accounts with balances.
It Reduces Stress
Being flooded by notices and calls for collection can be extremely stressful for anyone. Since consolidating credit card debt helps a person take control of their debts, they won’t have to worry about missing multiple due dates with multiple creditors or the fear of having extra fees added as a result. Most people don’t realize how heavily their credit card debt weighs on their minds until they decide to refinance.
Planning to Refinance Credit Card Debt?
DebtHelper.com is an IRS-approved 501c3 Non-Profit Florida Corporation dedicated to its mission to educate, advise, and empower people to handle debt. If you’re ready to reduce your monthly payments and get out of credit card debt, contact us today to schedule a free credit counseling session with one of our certified credit counselors.