You might have found yourself tempted by the endless credit card offers hitting mailboxes with regularity, even during the recession. Low interest rate offers and the chance to shift balances can be hard to resist for some in this economic climate. Before you take advantage of one of those offers, check out these facts to see who ends up benefiting the most.

The Rate Dance

Lots of people take advantage of seemingly hard-to-believe credit card offers. The plan is to refinance their credit card debt before the teaser rate goes up – usually substantially. However, what usually happens, and the credit card companies count on it, is that people either forget or are unable to transfer their balances again.

Fees to Transfer Balances

The fees on balance transfers are usually between 3% – 4%, and can go up to over 5%. With fees that high, any interest rate advantage you might think you had would be quickly offset.

Beware the Cost of New Purchases

Don’t think you’ve got it made if you got what seems like a good deal on your balance transfer. Credit card companies will just make it up on what they charge you for new purchases, often charging a much higher interest rate on them. Then, standard practice is to apply payments first to the lower rate portion of your balance, then to the highest rate portion which is usually all your new purchases.

Don’t Believe the Pre-Approved Offers

Consumers are more and more frequently falling for heavily promoted, pre-approved offers from credit card companies. But once they sign up, they find their credit history doesn’t pass muster and they don’t qualify after all. Instead, they are routed into a higher rate offer, sometimes without even realizing it.

Additional Fees Can Add Up

Banks are finding consumers more and more susceptible to pitches for debt-suspension or debt-cancellation contracts with the recession and prevailing job insecurity most of us are facing. These offers sound like insurance, but are actually unregulated contracts designed by lenders to extract more fees. They’re also ridiculously expensive and have considerable restrictions, making them difficult to collect on even if you wanted to.

Credit Score Impact

Your credit score can be hurt by the balance transfer game in several ways. Applying for new credit is a strike against you as lenders do not want to lend to folks that actually appear to need it. Second, your debt to available credit ratio goes up when you transfer a balance from a high limit card to a lower-limit card. Another strike. Finally, most people close their old accounts when transferring balances to a new one. This again increases your overall debt to available credit ratio, which is another negative.

The Right Way to Use a Balance Transfer Offer

The key to taking advantage of balance transfer offers is to focus on using the low rate to quickly pay off your balance, rather than charging up more debt. Used correctly, they can help you eliminate your credit card debt, despite the potential pitfalls.

If you accept one of these offers, it is essential that you pay as much as you can each month toward paying off your balance. Your goal should be to pay it all off, or as much as possible, before the teaser rate expires. Make sure you put the rate’s expiration date on your calendar and whatever you do – don’t add to your troubles by making any new purchases. A disciplined approach, along with spending controls, will give you the advantage in attacking your credit card debt.

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