Today almost half of Americans carry credit card debt. In fact, almost one-quarter (23%) of credit card holders have added to their credit balance as a direct result of the COVID-19 pandemic.1
Carrying credit card debt is a huge weight on anyone’s shoulders, and it can very quickly become overwhelming. If that’s the case for you, you’re certainly not on your own.
Whether you’re planning to just pay off the minimum or hoping to tackle a bigger chunk, knowing your monthly payment is looming can cause the kind of anxiety and worry that keeps you up all night.
But the good news is with a bit of planning, there are many solutions to help you tackle credit card debt.
Everyone’s situation is different, but for many, a smart path forward is to choose to consolidate your debt.
The positive effects of debt consolidation
Debt consolidation is exactly what it sounds like: Combining a series of smaller loans into one larger loan, often with a lower interest rate and a longer time period to pay it off.
There are many benefits to debt consolidation. The main one being that it leaves you with less interest and you’ll have to make one payment versus several.
But there are also hidden positive psychological effects to consolidating your debt which many people don’t realize.
Simplify the process
When times are tough, the less stressful information we have to process, the better. Debt consolidation provides a more simplified way to repaying your loans.
One of the main challenges people have when faced with credit card debt is becoming overwhelmed by the number of decisions that have to be made over a small period of time.
With so many decisions to be made — especially about which credit card to pay off first — we often end up falling into the trap of paying off the creditor who is shouting the loudest for repayments rather than thinking strategically about which loan makes the most sense to pay off first.
Simplifying this process helps us better process information, and debt consolidation is one of the best ways to do this.
But the biggest positive effect to debt consolidation is the liberating feeling you get when you shift from having four or even five monthly credit card payments to just having one. It helps you maintain a positive mindset and helps to lift that huge weight off your shoulders.
It’s important to remember however that debt consolidation is only a short-term solution. In reality, we should all be actively trying to avoid credit card debt by developing a plan to help us spend within our means. Learn more about how to create a budget here.
Learning to manage your debt is a step forward on the path to financial confidence. For additional tips on managing your finances sign up for the onUpdates newsletter.