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How To Manage Credit Card Costs

Transfer Balances To A New Account Or To An Account With A Lower Interest

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Another alternative for dealing with credit card debt is to move the balance from a card with a higher rate of interest to one with no or a lower rate of interest.

In theory, this seems like a good idea. We say "in theory" because if you miss one payment, you may be socked with a major rate of interest and penalties.

If you use this technique:

  • Be sure to make payments on time.
  • Keep track of when the interest rate increases. Before the increase takes effect, look to see whether the balance should be moved to another less expensive card.

Before you make the transfer from a credit card with a higher amount of interest to another credit card, watch for balance transfer fees-fees charged for transferring a balance from another credit card. While it may sound like a no-brainer to switch from a higher rate of interest to a lower one, this may not be the case once you add in the transfer fee(s). Do the math.

Be careful of a low "introductory rate" that most cards offer. This rate may be in effect for only two to six months. Once the introductory rate is over, the rate could sky rocket. Set an alert in your calendar for when the rate will increase. If you haven't paid off your debt by then, consider switching once again.

If you don't already have a no or low rate of interest account, you can find such accounts on line at web sites such as offsite link. At this site you'll find companies that solicit transfers -- offering no or low interest on an introductory basis. You are also likely to receive similar offers in the mail.

Once the account is open, transfer as much of the debt as you can to the new account. Some credit card companies will actually make the transfer to the new account for you. All you have to do is call the credit card company and ask.

If this system doesn't work, you can transfer from one credit card to another by writing a check on the account to which you want to move the debt. The check would be payable to the credit card company from which you are moving the debt. If writing a check for this purpose is considered to be a cash advance, and subject to a higher rate of interest, call the credit card company. Let them know what you intend to do and ask for a lower rate.

If you have a short life expectancy: Keep your old credit cards open even after you've transferred the balances from them. You may need the borrowing power. Be aware that having too much credit and too many open credit lines can damage your credit rating. However, that can be a small price to pay to have the ability to get cash for unexpected medical expenses.

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