This article is reprinted by permission from NerdWallet. A new year is a time for resolution-making, and in 2023 you may be especially determined to get control of your finances. For many, that means eliminating high-interest credit card debt.
Credit card balances were up 15% in the third quarter of 2022 compared to the same quarter in 2021 — the largest increase in 20 years — according to the Federal Reserve’s most recent household debt and credit report. Delinquencies, though still at historic lows, are also increasing. And thanks to higher interest rates, carrying a balance is more expensive, making it easier to fall deeper into debt. But there’s a strategy that can help. Debt consolidation, a process that rolls multiple debts into one monthly payment at a lower interest rate, can be a life raft for those who can’t get out of debt by making the minimum payments alone. Follow these three steps for consolidating your credit card debt in the new year. 1. Choose the best consolidation tool for your credit score and debts Two main tools for consolidating credit card debt are a balance-transfer credit card or a debt consolidation loan. Both work by rolling your existing debts into a single payment. With a balance-transfer card, you move higher-interest credit card balances onto it and then pay down the debt at a lower rate. In addition, most balance-transfer cards come with an initial 0% promotional period, typically lasting 15 to 21 months, in which you won’t accrue interest, so you can get out of debt even faster. Balance transfer cards sometimes charge a transfer fee — typically 3% to 5% of the total transferred — …