Financial management is critical to your current wellness and future success. It all starts with education and information on managing your finances, and Altra Federal Credit Union can help.

Question: I need to get my credit cards under control. How do I consolidate my credit card debt?

Answer: Credit card debt is the most common type of debt consolidation. Whether it’s struggling with high interest rates, carrying over large monthly balances, or making just the minimum payments, paying down credit card debt can be financially stressful for many of us.

There are several ways to consolidate credit card debt. Combining debts into a single balance transfer card or loan with a lower interest rate may help you pay off that debt faster, save money on interest, and reduce the chances of making a late payment – or missing a payment entirely. It can also help simplify your finances and your monthly budget.

Consolidation options

Balance transfer cards: Consider transferring your high-interest credit card balances to a card with a low fixed balance transfer rate. Check with your financial institution for balance transfer options with no associated fees for new or existing accounts. Some may offer fixed balance transfer rates for the life of the transferred balance, which remains in effect until your balance is paid in full. Some balance transfer cards may offer a 0% introductory APR (annual percentage rate), typically for 12 to 18 months. But be aware: balance transfer fees apply and are usually 3% to 5% of the transferred amount. And after the promotional period ends, the interest rate jumps, often to 20% or higher, so it’s crucial to pay off the balance transfer within the interest-free period to avoid high finance charges.

Personal loan: A personal loan can be used to pay off credit card debt and combine multiple balances into one loan with a fixed interest rate, a fixed payment, and terms typically up to 60 months. Rates and terms are determined by your individual credit history. Reach out to your financial institution for available options.

Home equity loan / line of credit (HELOC): Homeowners can tap into their home equity as collateral to borrow funds and consolidate debt, often at a lower interest rate than credit cards. A Home Equity Loan provides a lump sum with the security of a fixed rate, a fixed term, and a fixed payment. A Home Equity Line of Credit (HELOC) is a revolving line of credit with flexible terms; you access money as needed and make payments only on the funds you use. Both HELOCs and home equity loans are secured by your home, so it’s important to consider the risks – missed payments could lead to foreclosure. Discuss these options with your financial institution before committing to a new loan.

What to watch out for

Credit score impact: Applying for a balance transfer card or loan may cause a temporary dip in your credit score due to the credit inquiry required. Lenders use credit scores to evaluate loan applications and determine the rates and terms. However, if managed responsibly, credit card debt consolidation can lead to long-term benefits, such as improved credit scores from making on-time payments and reducing credit card balances.

Fees and terms: Carefully review the fees and repayment terms associated with balance transfers or loans before proceeding. Some financing options may have hidden fees, pre-payment penalties, or other costs that could eat up the savings you expect.

Scams: Be cautious when dealing with companies that promise “debt relief” or an “instant fix” for your situation. If a company asks for large upfront payments, makes unrealistic promises, or pressures you to act fast, these are red flags. Work with a financial institution you know and trust to steer clear of debt consolidation scams.

Altra Federal Credit Union offers an array of financial tools and information to help you manage your money. For more, visit them online, visit one of their Clarksville locations – 1600 Madison St. or 2625 Wilma Rudolph Blvd. – or call 800-755-0055.

Brian Selph is the Retail Market president for Altra Federal Credit Union. Portions of this article are shared by our partners at GreenPath Financial Wellness, a trusted national nonprofit. Content is for informational purposes only and is not intended as legal, tax or financial advice.