Credit Card Management

Making credit card applications work for you

Yes, you can take advantage of the best credit card deals. Of course, there’s a trick to it. You simply have to understand how the credit card companies play the game, so you can beat them at it.

Obviously, credit card companies are not going to offer deals unless they know that they can make money. But that doesn’t mean that you have to be one of the people that they make money from. All that it takes is two credit card applications and a plan.

The Zero-Percent Game. Zero-percent balance transfer credit cards seem to be everywhere, offering to transfer a balance from your existing credit card(s) onto their card with an interest rate of zero percent. Their goal, of course, is simply to get you to apply for their credit card. And why shouldn’t you? Your current APR is certainly higher than zero percent, so what have you got to lose?

The catch comes with new purchases, which are charged at the card’s regular APR. Of course, you already pay full APR on your current card, so why should you be concerned? Most consumers are not aware that any new payments they make are going to be applied first to the principal that has the lowest interest rate.

This means the balance that was transferred over initially to take advantage of the zero percent rate. In other words, that entire transfer balance has to be paid off before any monthly payment can be applied to your new charges.

This can result in finance charges at the new card’s regular rate that build up over time to cost you more than you actually save by transferring your old balance to the new card.

Strategy. You can, however, take advantage of the zero-percent interest and avoid paying unexpected finance charges. The simplest way to do this is to not make any new charges on the card after you've made the balance transfer.

This may not be a realist choice, however, as so many of us rely on credit cards There is a more practical plan that involves a little discipline and the use of two credit cards. One card has the zero-percent transfer rate and the other card has the lowest APR available and/or a rewards program that fits your needs. Just follow these simple steps to success.

First, find the best zero-percent card. All zero-percent balance transfer credit card offers are not created equal. Throw out the credit card applications for zero percent deals that charge a balance transfer fee or an annual fee. Also pass on any offers that require new purchases each month. Find the best card that offers the longest period of time at the zero-percent rate.

Next, make a plan for how you will pay off the zero-percent balance. Ideally, you will find a card that offers the zero-percent rate for as long as it takes you to pay off the transfer balance, but if the zero-percent rate is only for a specified period of time, be prepared.

Either pay it off in the allotted time, or consider transferring the remaining balance to another card when the zero-percent period ends. If neither option is possible, make sure that you have chosen a card that converts to an APR that is the same or lower than your original card.

Finally, apply for a second credit card so that you have a credit card available for new purchases. Again, look for a card with no annual fee. If you expect to carry a balance on your new purchases, find a card with a low APR. If you are trying to get rid of your credit card debt and can pay off your balance each month, then you should consider a second card that provides a rewards program of some sort - travel, cash, or whatever you are most likely to actually want and use.

Results. The idea is to find the best credit cards for you. If you can follow these steps, you can create your own debt management program. You can take control of debt that only seems to get bigger each month, move it to a zero-percent card, and set up your own payment plan. You can also find a brand-new credit card that actually works for you, instead of just making money from you.

You can win the credit card application game, but you have to be able to make a plan and be willing to stick with it. Remember to always read the fine print. And don’t make the same mistake that so many players do of becoming addicted to the game itself. While it is incredibly rewarding to take advantage of the many balance transfer credit card offers, remember that the goal is to get rid of your debt and take control of your own finances.