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Debt consolidation through credit card checks should be approached carefully
By Marvin Milner on Mar 20th, 2010
One form of debt consolidation consumers may consider is using a check provided by their credit card company.
These offers from credit card lenders allow consumers to pay off other debts with the checks, with the money coming out of cash advances allowed through the accounts. However, the Federal Deposit Insurance Corp. notes that consumers need to make sure they pay attention to the fine print before doing so.
The FDIC notes these offers may come with transaction fees that amount to a certain percentage of the check's value. Consumers also need to see how long any introductory interest rates last on these balance transfer offers.
"In addition, the interest rate on this loan to yourself can be much higher than the rate on your card purchases, perhaps twice as high," the FDIC said.
Though balance transfers through these checks may have their limits, other forms of debt consolidation may help consumers who are having difficulty paying down their bills. One advantage to debt consolidation is that it could lower the interest rates consumers pay on the debt they already have.
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