If you get a piece of mail from a credit card company these days, its much more likely to be an opt out notice than a 0% APR for 1 year offer. During the past two years, credit card offers sent via the mail have declined by nearly 75%. However, that hasn’t stopped credit card companies from using the postal service to send out rate increase notices. During the past year, just about every major credit card company has sent out one form of these notices to a wide range of customers. Usually, these mailings provide you with two options: accept a higher interest or opt out and close your account.
Unfortunately, neither of these options is ideal for just about anyone. Closing an account can hurt one’s credit score, while accepting a higher rate can be extremely costly. If, for example, you owe $5,000 on a credit card with a low rate of 10%. You’ll pay around $500 a year in interest. A rate increase to 15% will cost you $250 a year. A rate increase to 20% will cost you $500 more a year. And if that rate increases to 29.99% as it has for many people this year, you’re annual credit card interest expense skyrockets by $1000.
Clearly, paying an extra $250 to $1,000 a year is not what anybody needs these days. However, many are hesitant to close accounts because of the possible damage to their credit scores. Yes, this is a reason for concern if you are buying a home soon, but if not, you should be more concerned with saving money than a few points on your credit score which will return in a few months if you manage your credit wisely.
Fortunately, there is a third option that is not mentioned in credit card opt out notices: 0% balance transfers. If you are unfamiliar with 0% balance transfers, the process involves applying for a new credit card that offers a promotional rate and moving your debt from the old credit card to a new one that offers a promotional rate. If you can get approved for one of these offers, you can transfer your high interest balance from your old card, keep it open (which will help your credit score) and pay less interest on the debt you already have thanks to the 0% rate. (You also get to stop giving your cash away to the company that raised your rate.)
Electing to keep your credit card open and using a balance transfer instead of opting out is an option your credit card company probably doesn’t want you to take. However, this strategy can save you hundreds of dollars in interest, help you get out of credit card debt faster and limit the damage to your credit score.
For more information on 0% APR balance transfer credit cards, please use the links on your left to compare current offers and apply online.
