Consolidating Credit Card Debt - A Wise Move?
Elaine Morgillo writes for New Hampshire's Portsmouth Herald about a TV ad she finds particularly annoying recommending consolidating credit card debts to lower monthly payments. She goes on to point out that the benefits of debt consolidation may not always be real - because, in the process, the borrower is often trading off lower monthly payments now for much higher interest payments over the longer term.
"Here’s an example using a hypothetical $10,000 credit-card debt. Adding that balance to a new 30-year mortgage at a 6 percent interest rate would increase your mortgage payment by only $59.96 per month. But over 30 years, the interest paid on that $10,000 would be $11,585.If instead you were able to transfer that balance to a credit card with a 10 percent interest rate and made payments of $400 per month or 4 percent of the original balance, it would be paid off in 29 months at a cost of only $1,600 in interest."
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