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Dec 12 2011 12:00AM

Question


My husband and I are trying to pay everything off. We are young and in good shape on our credit cards, but I recently went over the balances and interest on them. We have one card that we owe $900 on with 19.99 percent. The other card is paid off, but has a 29.99 percent interest rate when we do use it. Would it be smart to apply for a better credit card with an intro rate on balance transfer and a lower rate to get rid of these two cards we got years ago?

Answer

“Yes...yes...yes!” said FPA member William Bivin, CFP®. “Run from those cards as fast as you can! Try to find a card, either through your bank, a credit union, or perhaps your favorite airline that offers a reasonable rate (eight percent or lower) and open an account. Even if they do not allow a balance transfer, you should move your account. If transfers are allowed, move the entire balance to the new card. A good card company will also have some type of rewards program that offers incentives for using their card.
 
“By the way, you don't need a wallet full of credit cards! Maybe one in your name to establish your personal credit history and a separate account for your husband. However, many high net worth clients we have worked with over the years, get by just fine with only one credit card account! Just practice paying off your entire balance each month. That way you'll never pay any interest, no matter what the rate.

“Some cards have annual fees. Try to find one with no fee or a low fee. Finally, remember to notify the credit card companies, with whom you currently have accounts, and tell them that you want to close those accounts immediately. Pay them off, then close them in writing. Keep a copy of your letter, after sending the letter Certified with a Return Receipt. That way, you can prove the account should have been closed.

“Good job keeping your balances very low. You're off to a great start. Next hurdle is to max out your contributions to retirement savings, and pay off the house and cars!”

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