Don’t Be Seduced By Zero Interest Credit Cards

Anyone with a credit card will tell you, interest rates can be crushing.

“I think it’s about 16 percent,” says one New Yorker.

“Right now on one of them, I’m paying 9 percent,” says another.

“I think it’s like 19 percent,” says a third.

So if you hear an offer that you can transfer your balance to a new card and get a zero-percent interest rate, the allure can be palpable.

“You think, ‘Wow, this is fantastic,’ but you know what? A lot of times this is too good to be true,” says Ellen Breslau, the executive editor of Women’s Day Magazine.

Breslau, who writes a blog called “Money Talks,” says the biggest pitfall of promotional rates is that the low annual percentage of rate generally only lasts about six months. After that, it can skyrocket to 20 percent or more. Miss a payment, and you could be looking at 25 to even 29 percent.

“Come on, that’s a quarter on the dollar!” says a New Yorker.

What’s more, check the fine print and you’ll find the money you think you’re saving by lowering your APR is often eaten away by transfer fees. They sound like small change but add up to big bucks.

“Three percent, 4 percent, it could be hundreds of dollars, so you need to think about that,’ says Breslau.

If you do decide to do a transfer, do not transfer more than half of your new limit, because that will leave you with very little available credit. It’s dangerous for you and raises a red flag for lenders.

Also avoid the urge to cut up your old cards after you transfer the debt.

“Don’t close them, because that’s going to reflect on your credit score and you’re going to have very little credit available,” says Breslau. “They’re going to see this person had a lot of credit and now they don’t have much. What happened there?”

Of course, not all offers are disasters waiting to happen. Breslau says if your credit score is over 700 and if the interest rate will remain low after the introductory period, it may be worth your while.

Better yet, she says, rather than pay the transfer fee and take your chances with a new company, work with your existing lender and see what they can offer you to get you to stay.

“Call them. It might take a few phone calls, you might have to speak to a manager, but guess what? They will probably lower your rate if you ask,” says Breslau. “All you need to do is ask.”

Finally, if you do decide to forego the balance transfer offer, be sure you shred it rather than just throw it away. If you don’t, someone else will be happy to take that offer and your identity along with it.

Source; NY1