Debt consolidation does not reduce your credit card debt in any way – which means you still get the full effect of what you owe. So if you get yourself out of debt, you may want to make sure that you will never go through that again. The restriction that you will feel on your budget and the money that you will waste on interest payments should convince you to never go down that road again.
What makes debt consolidation effective in is the fact that it solves your credit card debt problems by helping you create an easier payment scheme. It provides consumers with a single payment plan that is lower than their current monthly requirement. Not only that, it increases the chances of getting a low interest rate. While it is not always a guarantee, getting it done means a much lower monthly contribution for the consumer.
Though that sounds easy, the whole process is quite difficult. The consumer will have to be ready to face a lot of temptations – especially in accumulating more debt. If they chose debt consolidation loans, for instance, this means getting a loan that can pay off the other debts – usually credit cards. When this happens, the cards are left with zero balance. That makes for one very tempting product to use so you need to be careful when you use debt consolidation for credit card debt.
There are many things that you need to do to avoid debt and one of them is to get rid of the temptation to spend more than what you can afford. The number product that allows that to happen are credit cards.
Some people cannot imagine living life without their credit cards but you need to realize that it is possible.
Ideally, you should remove your credit cards completely. Close them off once you have completely paid off what you owe. Some people may want to compromise by retaining one card for emergencies. While this is okay, you need to clearly define the emergency situation that permits you to use your cards. Emergencies can be household and car repairs, or any health-related expenses. Shopping is not an emergency so make sure you stick to your rules. If you think that you cannot, you may be better off cutting off all your cards.
Adapting a cash only purchase should be more beneficial for you – at least if you know that you cannot control your spending. If you run out of cash, you have no choice but to stop spending. If you have your card, there is no stopping the purchases until you reach your credit limit. But by then, it may be too late.
Your cash spending should allow you to stick to your budget. Usually, an envelop system is the best one of implement. It literally means dividing your income into various envelops that represent the different category expenses on your budget. For instance, you have a category for food, groceries, utility bills, debts, and entertainment. When the cash runs out on each envelop, that means you have no more money to spend on that category.
No doubt about it, getting rid of your cards will help you live within your means and thus stay out of debt so you may want to consider giving it up completely.