Page 46 - Book1E

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Poor Cash Flow
Debt Consolidation and Balance Transfer
Have you consolidated all your debt only to find that all of your credit cards are near their limits again? According to William Richards Cluny, President and CEO of FFEF, it is never a wise idea to “replace debt with debt.” As well as accruing new debt, a debt consolidation loan may also hold your home or other major property as collateral. If you don’t make the payments or too many of them are late, you could lose your home.
Balance transfers typically tempt consumers to apply for a credit card by offering a very low interest rate on balances transferred to the new card. It can be great if you have high interest on other cards. But only if you pay the new card off before the offer expires. If you can’t, be sure you check very carefully to see what the interest rate is after the offer ends. It may be higher than you’re already paying. Balance transfers take self-discipline because you’ve now given yourself another opportu- nity to accumulate debt.
What should you do?
At the very least, cut up the card you transferred the balance from. Ideally, pay the transferred balance off before the offer ends for maxi- mum benefit. Then cut up both cards. And don’t forget to close the credit card accounts you transferred balances from.
LET’S REVIEW________________________________
How Much Do You Know about Your Family Finances?
Answer the questions below to see if you know everything you should about your family’s economic situation.
1. What is your annual household income? (exactly how much—not about how much)
________________________________________________________
2. What is your total annual savings?