Credit Card Financial Moves (Your Advice)

Posted by pfadvice
July 3, 2007

When someone has credit card debt and wants to reduce the amount they are paying on interest, there is always the question of what is the best way to reduce that interest payment. A lot depends on the particular circumstances of that person. One reader asked what is the best move to make for his mom and her two credit cards:

My mom has debts on two credit cards. She’s on a tight budget right now and can’t pay for them. (She has pretty good credit.) I was wondering what strategies she could go about to dealing with this. The obvious idea would be to pay for the entire balances right now but that is something that she can’t do.

I was thinking of doing this: opening up a new credit card, one w/ a 0% APR and transferring the balances onto that account. She’d be able to pay off the balance within a year. Is this OK? Or is there a better, more optimal strategy? (Also if this is a solution, can you please advise me on what cards would be good? I was thinking one of the Citibank cards.)

If you were in a similar situation, what steps your you take and why? Is there a particular credit card that you like in particular for 0% transfer moves?

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Information: July 3rd, 2007; 7 Responses

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Categories: Credit Cards

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Reader Comments

Comment Number:: 1
Written by:: dan
Posted on:: July 3, 2007 at 4:13 am

I think the a 0% transfer is smart if she has good enough credit for it. You can also call the credit card companies and see if they will lower the interest rate. I have done this before and it is fairly easy if you have good credit.

If you play the 0% game, you just need to be sure to make payments every month or the rate can skyrocket.

Comment Number:: 2
Written by:: Duane (Subscribed)
Posted on:: July 3, 2007 at 5:37 am

A balance transfer is worthwhile, but before doing this I would call the issuer and explain that I’m considering doing it. Quite likely they will counter offer with a lower rate or some form of promotion to keep your business if they anticipate losing the revenue. It is ultimately simpler to stick with the current debt instrument, but the person should negotiate for a better interest rate.

Comment Number:: 3
Written by:: disneysteve (Subscribed)
Posted on:: July 3, 2007 at 6:28 am

I think if she can qualify for a 0% card, that would be a great way to go.

Comment Number:: 4
Written by:: ben
Posted on:: July 3, 2007 at 6:41 am

With the information that you have given here, it seems that the 0% transfer is correct. It would help if we had a bit more. How much is on the 2 credit cards and what is the current rate being paid on both?

If you do transfer, make sure to get a card that doesn’t charge a transfer fee to the 0% card. Some do and this is a mistake, so read the fine print.

Comment Number:: 5
Written by:: pfadvice
Posted on:: July 3, 2007 at 6:44 am

Here is a list of some 0% balance transfer credit cards

Comment Number:: 6
Written by:: Special Ed
Posted on:: July 5, 2007 at 8:53 am

1. Stop using the cards
2. Call the CC companies and ask for a better rate. If they say no, call back and talk to someone else. Keep doing this. Someone will eventually work with you.

Comment Number:: 7
Written by:: liz
Posted on:: July 7, 2007 at 11:38 am

i am in a similar situation where the cc companies didn’t want to work with me to help throw all of my debt into one account - and when i phoned up and asked for a reduced interest rate both the companies laughed at me…but here is what i did..

i started paying off as much as i could on one card a month. i also stopped using it and starting using the one other card. try to do a balance transfer to move your money from that one card that it *looks* like you are paying off.

give it a couple of months. pay lots off on the one card, minimal on the other.

then, give a call to the credit card company. ask them for a reduced interest rate and you’ll consider moving the balance. repeat this move with your *other* credit card so they get freaked out too.

with my one card, with my largest balance, i was able to get a 20% interest rate moved to 10% in three months… which has helped me put more down per month on the higher interest card.

i would be wary of the cards that have 0% interest, mainly because they will have other restrictions like that % is only good for 6 months, or if you miss a payment your % rate will go up to 24% etc. i think that companies that you have worked with in the past *want* to work with you, but they just need to be given a shove.

the other way around it, if she can manage it, is to go to a bank for a consolidation loan, or see if she can refinance her home loan, and throw the credit card balances on there. the interest will probably be really low - the catch is you have to be careful not to rack up more costs again.