The credit card business is one of the most competitive
industries there is. You can tell that because you no doubt get dozens
of invitations for new credit cards every week. That is because the only
way a credit card company can continue to grow new business is to steal
the business away from another credit card company. It isn’t really a
business where there are a lot of new customers coming into the market.
The types of accounts the credit card companies want are people who are
carrying a lot of debt, who continue to pay on the debt but never pay it
off and who have no history of defaulting on their loans. If that
describes you, then you are on the A list for a potential customer for a
credit card company.
If you have a lot of credit card debt, it really
isn’t that flattering that other credit card companies want your
business. Even more infuriating is when a credit card company who
already has you in debt sends you offers for still more credit cards.
But there may be a glimmer of light in this tough situation. You might
be able to leverage you’re “A list” position with the credit world to
find a way to manage your credit card debt more successfully.
Typically if you have three or four or more credit
accounts, the credit ceiling on those accounts probably have gotten
pretty high. That is because, as we just reviewed, if you carry debt but
pay on it, that sets a cycle in motion for the credit card companies to
offer you as much debt as they think you might use so you can owe them
even more money. Again, while this seems cruel and heartless, that is
how these folks make their living so they have to find some way of
attracting the debt of the A list customers.
But another method they also use is to offer you an
attractive rate of interest to either start a new account or transfer
debt from an account you have to your existing account. A common “come
on” is to offer you zero percent financing which seems wonderful because
in theory you could transfer all of most of your debt to the generous
company and not pay any interest which would greatly speed your pay off.
Transferring balances has its good side and its
negative side and you need to be smart about both. Read every word of
the offer, even the small print on the back of the page because you must
understand any hidden fees you might face if you accept their
generosity. Almost always the zero percent or low percentage rate is for
a very limited time of perhaps three or four months. In credit card
land, this is a heartbeat. Then once they have your account balance of
your debt built up, they can jack your rates up and you are right back
where you started.
So be smart about using these kinds of offers. A
great tactics is simply to transfer a fairly small amount of your debt
to the zero percent offer. Transfer $1000 and then pay it off over the
three to four mouth period. You win because you paid no interest and
they lose because they can’t sting you with a high interest rate at the
end. Also be aware of any transfer fees or membership fees if you are
taking out a new card. These fees can amount to additional interest and
negate much of the benefit. But if you are smart and use these offers
shrewdly, they can be terrific ways for you to drive down your credit
card debt surfing “come ons” from the credit cards companies in a clever
fashion.