Ultra low rate cards are tempting, but can be a trap. Consider all angles before you jump into them.

You have a $5000 credit card balance at 15%. You're making only the minimum payment. You get yet another one of those 1.9% teaser rate cards in the mail. You're tempted to transfer the balance. Should you?

If you're like most people with balances, the answer is probably not. If all goes extremely well, you may pull off paying off the balance without any disasters. But, if disaster hits, look out.

At the very least, consider the following:

Is there a balance transfer fee? Some low rate cards will charge a balance transfer fee, maybe 2% or 3% of the balance, often with a minimum that may be more than that if your balance is relatively small. That could eat into your savings.

How long does the promotional fee last? Some of these cards only allow you to keep the promotional fee for three to six months. After that, the interest rate goes up considerably.

You may think that if you're really organized, you'll find another low rate card before this one expires. You may or may not be able to do that. You may or may not remember to get the new card before you have to pay the "standard" rate which is much higher. Then if you have a month or two of the standard rate along with a balance transfer fee because you can't find a card that doesn't have one, look out. There goes your savings.

What about the grace period? Many of these promotional cards have very short grace periods and large penalties if you are late. Additionally, with most of these cards if you are late only once, you lose the promotional rate and then have to pay a standard rate.

Consider the effect on your credit record If you become a rate hopper, this will show up on your credit report because there will be a large number of inquiries and other evidence. If you want another type of loan down the road, many of the best institutions will balk at lending to you if you are a rate hopper. They are afraid you will jump ship before you have an opportunity to be profitable with them.

Will having one of these cards tempt you to overspend? Sometimes the reason a person is seeking out an ultra low fee card is because (s)he got into credit card debt by being a big spender. If this is the case with you, will having the low-fee card tempt you to get into the overspending habit? Shopaholics and debtaholics may be tempted to spend more if they have a low fee card rather than taking the steps necessary to curb their spending.

Let's face it. These credit card companies don't offer the low fees because they love you and want to do you a service. They offer them as a come on, hoping that you will become more profitable to them either by slipping into a higher rate category or by buying something else from them.

Low cost cards are everywhere and there may be circumstances under which you might benefit from them. Before you sign with them, however, consider all the caveats. When you do, there is a likelihood that they might not be for you.
 

have the courage to question & challenge the status quo... refuse to accept "traditional" thinking and answers as fact....
~Kimlee