Low-Rate Credit Cards, and How to Use Them
Feb. 7, 2009
I hope you pay off your credit card at the end of each month -- no balance. The credit card companies hate people who do this. They call such people "freeloaders" or "deadbeats."
I do make one exception to the "pay it all off" strategy: when you are trying to raise your FICO score. In this case, you buy something expensive ($500+) that you can afford to pay cash for, set aside the money in an FDIC- insured savings account, and take three months to pay off your card. This establishes you as a person who pays on time.
The rate differences between cards can be astounding. So, if you decide to use my "buy now, pay later, raise your FICO score" strategy, use a low-rate card. You can find low-rate cards here:
Apply for one, even if you have an existing card. This will increase your line of credit, which raises your FICO score if you don't borrow against it, or if you borrow and pay it off.
If you are in the hole to a card company, you had better start using a low-rate card. How high an interest are you paying? Do you know? If not, find out. Check you most recent billing statement.
Your first step is to find out if you can switch your existing bill to a low-rate card. There are introductory rates of 0% available. These may last six months.
Find out what rate this will jump to if you switch. You may be able to cut your rate substantially. Use this reduction to speed up your pay-off period. Pay off the card at the same monthly payment as before. Better yet, increase the payment.
Don't sit there doing nothing if you have a credit card balance that you cannot pay off immediately.
To subscribe to my free Tip of the Week, use the subscription box here: www.GaryNorth.com.