Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

Balance transfers

Dr. Don,
What are the disadvantages of transferring an outstanding personal debt from one credit card to another after the low six-month interest rate expires? This will be the third time I am considering such an action.
Thanks,
C.C. Credit

Dear C.C.,
The balance transfer game has become more challenging as credit card companies put up barriers to discourage you from jumping from card to card. Balance transfer fees, increased rates after missed or late payments, or account termination fees can mitigate the attractiveness of transferring your balances to a new card.

But if you've done it successfully before, there's no reason why you can't do it again.

From the consumer's point of view, balance transfer plans allow you to pay down your outstanding balances more rapidly because less of the monthly payment is going to pay finance charges. It can be a good way to jump-start a plan to pay down your balances.

Credit card companies offer these plans to win your business away from their competitors. If they can't keep your business after the promotion ends, there's not much point to it for the companies.

That's why you need to read the fine print in the credit card agreement so you know what changes and charges will apply when you change cards, both with the planned current transfer and a possible future transfer.

This Bankrate feature, Step slowly onto the balance-transfer bandwagon, describes the balance transfer process in more detail. Bankrate also provides a balance transfer worksheet to help you keep track of the steps involved in transferring the balance.

Changing credit cards

Dr. Don,
Can you tell me the best way to go about requesting a lower interest rate on my credit card? I currently have a credit card that I got four years ago when my credit was not so good. Since then I've turned things around and now have a spotless credit report. I have an excellent payment history with this card as well as all my other cards.

I called the credit card company to ask them how I go about requesting a lower interest rate on this card. Their response was like they never heard of such a thing and said the card I have is not eligible for a lower rate. Do I need to cancel this card and request a new card with a company that has a lower rate?
Please help,
Michael Mastercharge

Dear Michael,
Vote with your feet, and move on to a new credit card.

Given what you've told me, your current credit card company should have been willing to work with you. Don't cancel the old card until you have the new card in your wallet.

When you cancel the card, do it in writing and ask that they include on your credit report that the account was closed at your request. You can use this site's Credit Card Search Engine to find the card that is perfect for you.

You can't close the old account until you pay off the outstanding balance. Consider a balance transfer, but watch out for the potential pitfalls spelled out in my reply to C.C. in the previous letter.

-- Posted: July 26, 2001