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Is combining credit card debt a good idea?

Have you ever been forced to pay a late fee on a credit card not because you were unable to make the minimum payment, but because you simply forgot to pay it by the due date? If so, you are not alone. Many people struggle with paying their bills on time, and while this may happen because of a lack of funds, it, too, may result simply from having too many things going on in your head at a given time.

Debt consolidation is designed to allow you to pay off your financial obligations by combining multiple debts into one, single amount. While consolidating your credit card debt can be a useful method of getting your finances back in manageable order, there are some situations in which doing so may cause more harm than good. You may want to think twice before combining your credit card debt if you:

Value a strong credit score

Your credit score is meant to showcase your ability to pay back money loaned to you, and it tends to improve when you have credit accounts in good standing that have been open for quite some time. Therefore, if you are consolidating multiple credit card debts, you will have to close your older accounts, and this action in and of itself means your credit score is likely to take a hit. If you plan to try and take out a loan for a car, a home or another sizable purchase in the coming years, expect your credit score to be scrutinized.

Do not trust yourself to stay financially responsible

If you are someone who is frequently tempted to spend and finds that extra money "burns a hole in your pocket," debt consolidation may simply prolong the inevitable. By making smaller, more manageable payments toward your debts, you may feel you have more money at your disposal to spend. If you continue to spend in the same manner that created your considerable debt in the first place, however, the debt consolidation is unlikely to benefit you in the long-term.

Do not fully comprehend the terms of the consolidation

The main idea of consolidating your debt is to get it in a more manageable state with the hope that this will allow you to dig yourself out of it sooner. Before you sign on the dotted line, ask questions about interest rates, penalties and fees. You may be offered one initial interest rate that skyrockets after a certain amount of time, or you may have to pay penalties if you miss payments or, conversely, pay off the debt earlier than anticipated.

Consolidating your debts may help you pay them off sooner, but the process is not right for everyone. To discuss your specific situation, consider getting in touch with an attorney.

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