Atlantic Blog

Credit cards have become the modern way to pay. Their ease of use and attractive reward points and perks make them hard to resist. But there's a flip side.

Sometimes, that very convenience can lead to overspending. Add in some unexpected expenses, and suddenly, your credit card balance has inflated higher than you'd like. High-interest rates can then make it tough to regain control. If you find yourself in this situation, don't fret. Many of us have been there. Mainers rank 16th in the United States for credit card debt, with an average of $7,518 (Lending Tree).

Don't feel defeated by your large credit card debt. Remember, it's a hurdle, not a stop sign. With careful planning and discipline, you can overcome it.

If you're ready to eliminate your credit card debt once and for all, it's time to consider a strategy called debt consolidation.

What is Debt Consolidation?

When people hear the term “debt consolidation,” they often assume the process is complex, time-consuming, and costly. But that is far from the truth.

Debt consolidation is simply moving multiple credit card balances or low-dollar loans into a new loan. To illustrate, review the following example:

Imagine you have three credit cards with varying balances and interest rates.

Your total outstanding credit card debt is $4,500, and the interest rates range from 15.99% to 21.99% APR. Debt consolidation allows you to move all these debts into one new loan, as follows:

You can see that you now have only one outstanding balance with an interest rate of 8% APR. Debt consolidation provides several financial benefits, including:

• Easier to Manage: With only one monthly payment versus several, it’s much easier to stay on top of your current debt.
• Pay Less Interest: Depending on the type of credit card, the issuer, and your credit score, interest rates can be extremely high. Consolidating debt usually results in a lower interest rate, saving you a significant amount of money each month.
• Less Stress: While you still have to repay the same amount, a debt consolidation loan simplifies the process and creates a game plan to get back on financial track.

You typically have two different options when consolidating debt:

1. Credit Card Balance Transfer
2. Debt Consolidation Loan

Each choice has its advantages and drawbacks. So, it’s essential to review both thoroughly to determine which option will work best for you.

Credit Card Balance Transfer

With a credit card balance transfer, you are moving your outstanding credit card balances (like the earlier example) into a new, lower-rate credit card. This strategy is popular because the process is quick and easy to accomplish. And if you can find a card with no balance transfer fee, like Atlantic’s cards it makes the process all the more appealing.

• Advantages:
• • Low-to-No Interest: Find a credit card with a promotional offer of low or 0% interest and say goodbye to high interest charges. Repay your balances without accruing additional fees. 

NOTE: If you choose to use a promotional offer, read the fine print first. You’ll want to know exactly when the offer expires, possible terms that could void the incentive, and any fees charged.

• Disadvantages:
• • Costly Fees: Some credit card providers may charge fees ranging from 3-5% of the transferred amount. Atlantic charges nothing for transfers, so make sure to compare options and find a card that suits your needs without excessive fees.

• • Minimum Payments: One reason people struggle with credit card debt is that you’re only required to make a minimum monthly payment. This payment generally only covers interest charges, and the principal balance barely declines.

Don't get stuck in a cycle of debt. To truly eliminate your outstanding balance, commit to paying more than the minimum required amount each month.

• Tip:
  • Create a Strategy: If you're using a 0% APR credit card, be aware of when the promotional offer expires. Create a debt elimination strategy and make monthly payments accordingly.

For example, imagine you have $3,000 in credit card debt. The 0% promotional offer is valid for 12 months. That means you need to make at least a $250 payment each month to eliminate your debt before time expires.  

Debt Consolidation Loan

A debt consolidation loan operates the same as a personal loan. It’s an unsecured loan that will have set payments you’re required to make monthly.

• Advantages:
  • Lower Interest Rates: Debt consolidation loans typically have much lower interest rates than traditional credit cards – allowing you to save more of your hard-earned money.

• • Fixed Interest Rates: Your rate will not increase as a result of the economy or decisions by the Federal Reserve.

• • Set Payments: Pay off your debt faster with fixed monthly payments that eliminate the temptation of making minimum payments.

• • Known Payoff Date: Imagine the relief of knowing the exact date you will be debt-free. With a debt consolidation loan, you can experience this incredible feeling and use it as motivation to power through your financial journey. Say goodbye to endless uncertainty and hello to a clear path towards a brighter future.

• Disadvantages:
  • Higher Interest Rate: It’s very unlikely you’ll find a debt consolidation loan with a 0% interest rate (like some credit cards). But the interest rates charged are typically much lower than traditional credit cards.

We’re Here to Help!

Stop drowning in credit card debt and reclaim your financial freedom. Debt consolidation can relieve stress, elevate your credit score, and transform your financial situation. It's time to take control of your outstanding balances and pave the way to a brighter future.

If you’re interested in learning more about debt consolidation our team is eager to assist you in finding the perfect solution for your financial needs. Apply online today or visit any of our convenient branch locations. Our competitive rates and repayment terms are tailored to meet your specific needs. Atlantic is ready to help you reclaim your financial future.

Don’t hesitate to call 800-384-0432 or read more about Atlantic’s Auto & Personal Loans and take control of your finances. Say goodbye to debt and get the funds you need for those essential purchases.

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The Atlantic blog strives to deliver informative, relevant, and sometimes fun financial information. If you enjoyed this article, please forward it to a friend.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.