The first danger is that you’ll do something stupid, that is, you’ll do something other than put that money in a savings account offering a guaranteed interest rate and protection of your principal. Some stupid ideas include spending it, putting it in the stock market, putting it in a mutual fund, or trying to get more for your money than the bank’s interest rate. It’s tempting… but don’t do it!

The second danger is that you mis-read the offer and take one with a transfer fee, sometimes a 3% fee, that cuts into your earnings significantly. If you’re only getting 4% on your money and you have to pay a 3% fee, that means you’re only really earning 1%… a 1% that gets eaten away by the taxes you’ll pay on the 4% earnings. So, read the offer carefully and make sure that, if it has a balance fee, that balance fee has been waived for whatever offer you’re applying for. To avoid this, use sites like Zero Fee Balance Transfer as a starting point (double check those rates as they might change but it’s a decent starting point).

Finally, the third danger is that you forget to make a payment or continue to carry the debt after the promotional interest rate period. If you forget to make a payment, the rate will usually increase to whatever the regular rate is. If you forget to pay off the debt and the promo rate drops, you run the risk of cutting into your earnings by paying interest. So, be diligent and you won’t run into this problem.

Those are the major dangers of using a 0% balance transfer, be aware of them and you likely won’t fall prey to them.

Here’s a little customer service tidbit for those card issues who weren’t so good:

Overall, 27 percent of consumers who called customer support reported problems in getting help from representatives. The respondents reported unreasonable waits, difficulty navigating voice systems, or having to make multiple calls to speak to several staffers.

Source: CNN Money

The first is in the form of fees, often these offers have 3% balance transfer fees that eat into your savings. The second is in the rate after the promotion, some could be higher than what you’re doing now, so do the math to make sure it’s a smart decision. Lastly, don’t fall into the same cycle of debt over and over again. You’re getting a breather, use it to catch up, not fall farther behind.

The credit rating agency Moody’s told the paper the problem could be due to the property market slowdown and fewer homeowners opting not to refinance their residences.

“The combination of higher interest rates and a softer real estate market diminished the attractiveness of mortgage refinancings in which many borrowers reduced their more expensive credit card debt by drawing on the equity in their home,” Moody’s told the paper.

Commandment VII. Carry just what you need.

The Motley Fool recommends that you only carry one or two cards - one for purchases and another for emergencies, and that more than that is overkill. Personally, I carry several cards based on their cash back potential (one for restaurants, one for gasoline, one for everything else) and I recommend that if you have the discipline then you should do the same. The key to using credit cards is to maximize your cash back potential at every opportunity and lower your incidence of mistakes (missing a payment, exceeding your limit).

Source: The Motley Fool

Commandment VI. See yourself through others’ eyes.

This tip is another good one, from a general personal finance perspective; review your credit report from the three major reporting agencies (Experian, TransUnion, and Equifax) and you can get a free report each year because of a federal mandate. Review your report for errors, omissions, and inaccuracies because each one of those will reduce your credit score, which will affect what sort of rates you’ll get on loans - including car loans, mortgages, and credit cards. It’s imperative that you review your report every few months to ensure your credit history is being correctly recorded.

Source: The Motley Fool

What you won’t get with that free credit report is your credit score, which is what lenders care about anyway. If you have to get a free credit score, either for your housing application or something else, you’ll have to use a service like FreeCreditReport.com. Now, didn’t I just talk about how there are a lot of spammy, scammy, and fraudulent credit score websites? Well, this one isn’t one of them because it’s run by one of the credit bureaus - Experian.

When you get your free credit score, they sign you up for their Triple Advantage Credit Monitoring program trial of 30 days. Cancel within the first thirty days or they will start billing you $12 a month.

Problem solved!

If you recently applied for one of these cards, usually through a website that would require you to input bank information, check your account for an unauthorized charge. For more information, here is the full FTC press release.

Commandment V. When you get into trouble, stop charging.

This is a great tip… if you can’t make the minimum payments, please please please stop charging to your credit cards (they recommend “stop, drop, and roll” - hence the title of the post) because you’ll only dig yourself into a deeper hole that you’ll have to dig yourself out of later. Stop charging, drop the card, and roll that balance to a lower interest rate (or simply ask for a lower interest rate) so you can stem the bleeding.

Source: The Motley Fool