The Credit Card Balancing Act

May 26, 2010

By Barbara Marquand | Money Rates Columnist

About 15% of US consumers carry credit card balances of more than $10,000, according to FICO, and with interest rates in the double-digits on most cards, they pay dearly for the privilege.

Using Zero Percent Balance Transfer Credit Cards

Credit card promotional offers give 0% interest on balance transfers provide one way to lighten the load--but only if users understand the terms and apply discipline to pay down debt. Follow these five steps to play the balancing act and win:

1. Consider Credit Card Fees

Despite the seductive introductory rates, these credit cards are not free. Most charge a fee for transferring a balance, typically between 3% and 5% of the transferred amount. For $10,000, that's $300 to $500--no small change. Some cards have minimum and maximum fees. Check the terms and conditions to learn how much you'll pay. You might be better off focusing on paying off your credit cards rather than moving the debt around.

2. Introductory and Regular Credit Card Rates: Read the Fine Print

Time flies when interest is at 0%. Check how long the introductory rate will last. Will that give you enough time to pay down your debt substantially? Learn how much the credit card rate will be once the introductory period has ended and compare that to the rates on your current credit cards.

3. Your New Credit Card: Make a Payoff Plan

Plan how you'll use that zero-interest credit cards to your advantage. Evaluate your monthly budget to find places to cut expenses, and commit to putting those savings toward paying down your credit card balance. The low-interest deal won't do you much good if, after the introductory period, you're back where you started with credit card debt.

4. Resist Credit Card Temptation

If you're saddled with credit card debt, the last thing you need is to run up more charges on yet another card. Forget about getting a balance transfer credit card if it will tempt you into further unwise spending.

5. Understand Your Credit Card Agreement

Credit card offers tout balance transfer rates that are as low as 0%. The key words are "as low as." Whether you'll get the 0% rate will depend on your credit history. Read the best balance transfer credit cards 2012 agreement when the new card arrives in the mail to make sure you understand the terms you're getting. Confirm the rate for balance transfers and check the credit limit. The amount you transfer, including the transfer fees and the credit card annual fee, cannot exceed the limit.

Finally, keep up minimum monthly payments with your old credit cards until you've received written confirmation that the balances have been transferred. Pay the new balance transfer credit card bill on time, or the you'll risk losing the promotional rate.

Balance transfer credit cards give you a chance to play catch-up on credit card debt. Play your cards right, and you'll win.

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