One should never assume that just because he or she holds a low interest rate credit card that it can be used for anything at any time. Just as with other forms of credit, it is very important that you use it properly. Using these types of cards for things like transferring other forms of high interest debt to one low interest location can be quite beneficial and save a ton of money over the long run. Going about the process incorrectly or taking advantage of these cards can cause your plans to blow up in your face.
The main reason people get into trouble, especially people with good credit, is because there are tons of offers flooding our mailboxes and inboxes. It is quite tempting to want to accept each offer, and feel as though you can charge everything because the interest rate is low or zero percent, if even for a short time. This mind set can get you into trouble in no time at all.
One of the main reasons people give for carrying high amounts of credit card debt and for having multiple cards is because they started off accepting offers promising low or no introductory interest. Another issue is low interest rate credit cards are often used for balance transfers, which can be quite beneficial, except when the first (higher rate) card is then re-maxed out after the balance is transferred. Now you will have two credit cards with high balances, and a low interest rate that may end soon. This has become known as "the credit card trap".
All is not lost however; you do not have to become a victim of the credit card trap. With a little bit of information and self control, you set yourself on the path to financial freedom. Here are a few simple tips to get you started.
Cut up Credit Cards: Because credit cards tend to tempt people into spending more than they can actually afford, you should eliminate temptation right from the start by not carrying the cards in your wallet, and by cutting them up.
If you already have cards with balances, you should only be looking for a low interest rate card to consolidate your existing debt. Once you have transferred a balance or two, cut up the original cards. Officially closing the accounts may negatively affect your credit score, so just keep the card open but unusable. This will allow your credit report to reflect a zero balance on an account in good standing.
Lower Your Credit Limits: If you simply cannot bring yourself to cut up those cards, call your card issuers and ask them to lower your spending limit on the cards you will be transferring the balances from. This will keep the damage from being too serious should you start using the card once again.
Using low interest rate credit cards properly all comes down to self discipline and making a few lifestyle changes. The more you are able to control your spending habits, and stick to a healthy financial plan, the faster you will be on the road to becoming, and staying, debt free.