The number of businesses dedicated to providing debt consolidation services is soaring to meet the growing market caused by increasing debt among Americans. Many Consumers are finding themselves with financial obligations that they are not able to eradicate. A large part of this debt is owed on credit cards. With rising heating fuel and gasoline prices, along with greater minimum payments on credit card statements, a large number of people are finding it harder than ever to pay off their outstanding balances.

More and more credit card issuers are offering their cardholders debt consolidation loans and a plan of action to help steer clear of debt. Rates of interest on many varieties of loans are quite low, but for credit cards, the interest tend to be at least significantly higher. The credit card industry is a successful business, so why not extend it towards "helping" cardholders get rid of other debts by providing a debt reduction loan? Why not provide people the opportunity to move significant debts from other cards to the one they offer? While the credit card companies earn a small amount of money through the one to two percent fees they charge merchants at the time of sale, most of their income comes from the interest payments that they receive from debtors.
 

There are many things to ponder if you are thinking about relocating debts from various different credit cards to a single credit card for debt reduction purposes:

Does this account have a universal default clause? Should it, the penalty rate may apply should you make a late payment to any company. Paying the electric bill late could invoke the penalty rate on your credit card account. This would effectively negate any benefits you might receive from the low consolidation offer.

What is the penalty rate of interest? Credit card accounts have a default rate that can take effect any time you make a late payment. Default or penalty interest rates are likely to be very high; your terrific debt consolidation rate may be replaced by a 30% penalty rate if you pay late.

Is the rate fixed, or is it an adjustable or variable rate? Adjustable or variable rates may adjustment with little notice; you desire to be in the know of just how much your monthly payments can go up, particularly if the amount of money you are repaying amounts to thousands of dollars.

Read the cardmember agreement. Most credit card terms of service note that the lender or creditor can raise your rate of interest at any time, for any reason at all. The only requirement is that they provide you with two weeks' notice. any such offer, including one that is for the as long as you have the loan is actually only good as long as the business doesn't change their mind.

The creditor could offer you a favorable interest rate for the "duration" of the debt consolidation loan, or they might provide a rate that is only temporary. Make sure that you are aware what the rate is and under what circumstances, or if, they might adjust it.

Can you do better by taking out a loan from your bank or credit union? You may get a more reasonable interest rate and one that is permanently set from another lender. Check around first.