Using zero-percent credit card offers Ask Dr. Don by Don Taylor, Ph.D., CFA • Bankrate.com

Dear Dr. Don,
I have a zero-interest credit card with a $6,000 balance that I opened nine months ago. I transferred a previous balance to this credit card. The zero-percent interest will expire in three months. If I open another zero-percent interest card and transfer this balance, how important is it to cancel the previous card? Also how might this affect my credit score? Thanks. -- Bob Bounty

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Dear Bob,
As short-term interest rates continue to head higher, it gets more and more expensive for the credit card companies to make these zero-percent balance transfer offers. They do it to win your business, and if all you're going to do with them is take advantage of the no-interest period, then winning your business doesn't do much for them.

That doesn't mean you shouldn't take advantage of a balance transfer to another card with zero-percent interest, it just means that you need to carefully read the credit agreements for both cards and understand what it costs to effect a balance transfer and what could cause the terms of this offer to change. The Bankrate feature "Take care with your zero-percent credit card" discusses zero-percent credit cards in greater depth while the Bankrate worksheet "Step-by-step guide for transferring credit card balances" helps you manage the balance transfer process.

Every time you apply for credit, a credit inquiry shows up on your credit report and stays there for two years. A lot of credit card inquiries will hurt your credit score, especially if you keep applying and getting turned down for credit cards. One credit card application a year isn't excessive if you're not applying for other types of debt.

If you're not paying an annual fee on the existing zero-percent card, then it makes sense not to close the old account. Your credit score is based on the information in your credit report. The age of your account relationships is important, as is the ratio of credit outstanding to credit available. According to myFICO.com, closing unused accounts isn't a good short-term strategy for raising your credit score.

Zero-percent offers can help you manage your finances by freeing up cash in your monthly budget, to pay down this debt or other debts. Using the offers, instead, as an excuse to not pay down debt, or to increase current spending, means that you'll still have that outstanding balance to worry about when the new offer expires. Work on getting off the debt treadmill.