credit cards

Life-of-the-balance transfer deals

"It can be 2.9 percent for eternity, but it can jump to 29 percent if you're late paying your electric bill," says Scott Bilker, the author of "Talk Your Way Out of Credit Card Debt" and founder of DebtSmart.com. "A friend of mine was raised to 29.9 percent after he moved and an electric bill was paid late.

"The greatest sin in debt repayment is being late," Bilker explains.

How to get such offers

You'll probably need a good credit score to get those permanent-rate deals.

"Many times, the low-interest rate offers are for their best customers," Williams explains. "So a person who's had some poor payment history or who has been a card jumper, well, in that case the company will say, this guy is not going to stay with us."

People with heavy debt and a history of moving that debt from one card to the other -- the very people who would most benefit from a "forever" deal -- may not get them.

But that doesn't mean you can't ask for such a deal.

Scott Bilker says having lots of credit cards is a great way to get offers since better offers usually come from existing creditors. Of course, having many cards can create other problems, such as identity theft and the temptation to spend, but for getting transfer deals, they're helpful.

"My wife and I have 80 cards," Bilker says. "I get tons of offers from existing cards, and I also get new credit offers. The better ones are always the existing ones -- they're the zeros, the fixed forevers."

Ask for a great perma-deal

Both Oleson and Bilker suggest that this strategy can work: Call your existing creditor and say that you have a 4.99 percent offer from someone else and would like something better from them. Even if you don't have an offer, ask.

Card companies are dangling interest rates for two reasons -- to get new business and to keep what they have.

"People feel they're at the mercy of the cards, and that's just not true," Bilker says. "It costs about $200 in marketing dollars to get a good customer. They pay a lot of money to find someone profitable, and they don't want to lose you.

"Even if you pay your entire balance off every month," Bilker explains, "they're still making money from the merchants because you're charging, and the merchants are paying the card issuers a percentage."

So consumers have bargaining power, Bilker insists.

Profit off the deal?

Bilker actually made money off his cards. He took $62,000 in transfer deals -- at 0 percent -- and then put the money in a money market account at ING Direct. He pocketed $1,800 in interest after the transfer fees were taken into account. That was two years ago, but he's still seeing plenty of long-term low-rate deals.

Bilker says he "absolutely" would take advantage of a low-rate, for-eternity deal.

He thought of doing this with his mortgage. But Bilker emphasizes that you need to be extremely careful to try this because one slip -- one late phone bill -- and you could be at 29 percent. Nothing could be worse for a huge loan like a mortgage.

"I was trying to, for fun, pay off my entire mortgage with these deals. But I didn't, because with refinancing at 4.75 percent, it wasn't worth it. My best deal was 1.99 percent, and it wasn't enough -- it was $10,000.

"However, if I had a 9 percent mortgage and for some reason could not refinance, I'd consider using a credit-card deal," Bilker says.

More mundane benefits

The bottom line is that if you're careful and pay everything on time, you can benefit from locked-in low rates.

"I can currently get a used-car loan for 7 percent to 8 percent, or I can get a credit card at 4.9 percent, or even lower on transfers, which is an unsecured loan instead of a secured loan, and therefore better, at a great rate," Oleson explains.

And for consumers who are trying to dig out of a pile of debt, permanently low interest rates can be a huge help. The key, though, is to use the savings toward debt repayment, and once the debt's gone, to save and invest the money once earmarked for credit cards.

"Most people are not taking that extra $100 they saved on credit card debt and investing it. They're spending it," Oleson says.

It's still debt

Some credit counselors worry that "permanent" low rates can send people into the biggest trap: to forget that all debt is debt.

"Consumers find a variety of ways of tapping into cash at all kinds of interest rates, but at the end of the day it's still debt," says Williams.

"But if you can break the debt cycle, you can move from spender to budgeter to saver to investor."

The problem with low-rate deals, financial counselors say, is that they are deceptively relaxing.

"If I pay 21 percent to Sears, I can easily feel depressed," Oleson says. "But with a low rate, I am lulled into a false sense of security. I can be lulled to sleep.

"The challenge I see from the counseling side is, how did you get into this debt situation in the first place?"

And if you don't answer that tough question, and make serious inroads into your debt, an "eternity" rate combined with tiny minimum payments can literally leave you eternally in debt.

But if you handle it right, credit watchdogs say, a "life-of-the-balance" transfer deal can shorten the lifespan of your debt load -- and make your financial life a little easier.

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Product Rate Change Last week
Balance Transfer Cards 15.66%  0.01 15.67%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.86%  0.01 10.87%
 
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