Post-holiday credit card bills getting you down?

By Ben Woolsey

The first few months of every new year bring bad tidings in the form of credit card bills. While the holidays are a time of free spending and frivolity, January and February are often the hangover after the big party. But there are options for those who find themselves in the high-interest hot seat.

Two words describe the wisest course of action for those who have high-rate cards: balance transfer. Though 0 percent balance transfer offers may not be as common in these tough economic times, virtually every credit card issuer still has several credit card products tailored to consumers burdened by high-interest balances held with other banks or financial institutions. In most cases, banks will compete to gain access to your balances because they realize that once you carry their credit card in your wallet, you will be a long-term customer. Call it the force of inertia, but it is generally true that most consumers will stay with their present credit card product for at least four years.

But buyers beware: Michael McAuliffe, president of Family Credit Counseling Service, says if you're not careful, balance transfers can be a dangerous game. "A lot of the lenders offer them because they know that they're not going to have it paid off by the time the introductory rate is over. You can end up paying off one card with another, so you are still in debt."

McAuliffe first suggests avoiding shopping during the holidays with a credit card all together, and to turn down offers for store credit cards, which have high interest rates. "We get caught up in holiday lights and feel of the season and spend more money, even though we may go in with a list and say we will only spend a certain amount. We lose perspective and go way over, and the later you do your shopping, the more you spend. If you're already carrying a credit card balance, do your holiday shopping with a check or debit card." If you have already made the mistake of going wild with your plastic, McAuliffe says to find a balance transfer card with a lower rate and close out the other card -- or even cut up the card to make sure you're not tempted to use it until the other is paid off.
 
If you have a strong loyalty to your current card but it is charging high interest, you still have options. It can be beneficial to contact your current bank to discuss having them lower your rate. It might be necessary to threaten to take your business elsewhere if they are uncooperative.

Regardless of which credit card you carry, having a low interest rate should be your goal if you tend to have an outstanding balance from month to month. While it might not be feasible or even advisable to switch credit cards every time your introductory annual percentage rate expires, it's a smart strategy to shop and compare balance transfer offers every few years. That way you can be sure you are enjoying the lowest rates in the marketplace over time.

See related: How to cancel a credit card, Balance transfer calculator  

Published: December 30, 2008

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