How Credit Card Debt Consolidation Helps Consumers

The total amount of credit card debt currently outstanding is huge. According to the Federal Reserve, consumers owe a total of over seven hundred billion dollars worth of debt to credit card companies. This is only a small part of the total consumer debt owed, which is over two trillion dollars. Such a large amount of debt combined with a shrinking pool of credit indicates that the economy of the United States is heading into a long-term contraction and depression.

Such future indicators aside, dealing with credit card debt has become a major if not the primary concern of most consumers. Many people have focused on repaying their debt, and this has been somewhat successful. According to data from the Federal Reserve, the amount of revolving debt has been steadily decreasing for the past several months. That means consumers have been paying down their credit card debt successfully.

For many people, paying it down is not enough. The interest rates on some credit cards are brutal, which leaves many people defaulting on at least one of their cards. A popular method of remedying this is credit card debt consolidation, which means transferring all balances to the card with the lowest interest rate to ease the burden. This can help consumers repay their debts by allowing them to focus on saving money to repay the principal on one card instead of the interest.

Credit card debt consolidation does carry a downside, though. Many cards levy fees on balance transfers, which can add to the debt load significantly. They may simply have to accept it if they have no choice.

Credit card debt is pernicious and a threat to the stability of the financial system. Many consumers got into debt by buying questionable securities, like bonds backed by subprime investment property mortgages. Hopefully they will keep clear of debt from now on.

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