Managing Your Credit:
Snag the Most Fantastic Plastic
It used to be pretty simple for savvy credit card shoppers to know what to look for: a card with the lowest rate if you carry a balance, and a card with no annual fee if you don't. But with the banking industry's ever-increasing use of fees and penalty rates, consumers need to be even more vigilant about finding--and keeping--the best credit card deal. Below are tips on snagging the most fantastic plastic.
Dialing for Dollars
If you want to hold on to one of your major credit cards, but it carries a high rate or fee, simply call your card issuer and ask for a reduction. Issuers are often willing to grant good customers this request (though they won't publicize the practice!), because it's so costly to sign up new cardholders. Be persistent--if the first employee you encounter isn't helpful, request that you be transferred to a supervisor. If you're stonewalled at that point, consider switching to another card.
Time to Switch?
The introductory rates offered by issuers to entice you to apply for their cards have been steadily dropping, with some as low as 2.9 percent. But whether it pays to switch depends on your current balance and the rate you now pay on your card. In general, it pays to transfer if:
- you have at least $1,000 of debt on a card
- your new rate, after the introductory rate, is lower than the one you have now.
You generally won't come out ahead by switching cards if
- the long-term rate that kicks in after the teaser rate expires is higher than the rate you're paying now.
- you have more than $10,000 in debt. That high amount will make it difficult for you to qualify for a genuinely low-rate card.
- you fail to monitor your finances closely. The ultra-low teaser rates are usually good for only six months before they ratchet up substantially, so you may need to transfer your balance a number of times before it's paid off at the low rate. If you don't pay careful attention to when the rate switches and how quickly you pay the debt, you can find yourself paying a steep rate when the teaser rate expires.
If you decide to switch, scout out at least two cards you consider good deals. Apply for one and wait for a reply; if you are rejected, apply for the other. Applying for several cards at one time may cause card issuers to suspect you are on a credit binge, and reject you. Once the card is in your hand, you can close out your expensive accounts.
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