Step slowly onto the balance-transfer wagon
It's also important to understand your credit card agreements. "Always read the fine print," says Michelle Oliver, owner of The Oliver Financial Group in Richmond, Va. "Each credit card company is different when it comes to laying out their own rules. In other words, what may be good for one company may not be good for another."
For example, some cards may charge a hefty balance-transfer fee. Such charges must be factored into your decision.
Also, it's important to know yourself. If you have a history of paying bills late, understand that any late payments could lead to the immediate termination of the promotional rate. In that scenario, you'll be stuck with whatever rate the creditor gives you, which may well be higher than the rate you had before the transfer.
Making promotional offers pay
Promotional offers in the mail can help you improve your debt situation in another way. Often, such offers can be used as leverage to get your current creditors to lower your interest rates. If another lender offers you a better rate, call your current creditors and let them know you're thinking about taking the better offer.
"If consumers approach the company and tell them 'I'm
considering switching, can you lower my interest
rate?' most of the time that will lead the
credit card company to do that," says Bryan.
Your current creditors won't want to lose you, and if you've been a longtime customer who has generally paid your bills on time, they're more likely to work with you to make your credit card agreement more attractive.
There are various ways that
credit card companies work with consumers.
For example, some creditors will lower your
interest rate if you agree to let them take
the payment each month automatically from
your checking account. Creditors can also
help you out by deferring payments if you're
going through a rough time or moving payment
due dates around to accommodate your cash-flow
An added benefit of staying
with your current credit card company rather
than jumping ship is the history you have
with your current creditor. If you run into
problems down the road, it may count for something.
However, if you still decide to transfer the
balances on your credit cards to a low interest credit card, make sure you're
doing so as part of a plan to eliminate your
debt altogether, rather than merely doing
so to free up some extra money.
"If a person is that savvy in
moving debt, then they should be savvy as
well in saving, investing, and decreasing
and eliminating the debt," says Oliver. "Shifting
the mind-set to eliminating the debt rather
than lower charges will bring a person closer
to financial freedom."
|-- Updated: June 16, 2008