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Credit card debt may be mitigated by 0 percent cards

As the economy continues to strengthen following a period of fluctuation, credit card companies are once again looking for new business. Michigan residents may recognize how potentially valuable a 0 percent interest credit card could be in helping to minimize the potential for credit card debt, but may also wonder if it's all it's cracked up to be. The answer is more complicated than you might expect.

Many credit card companies are offering an introductory rate of 0 percent interest for the first 18 months that consumers carry a balance on their cards, which sounds like a great idea on paper. After all, it allows you to make a large-ticket purchase and pay off the balance before the interest kicks in retroactively later on. However, this relies on you actually paying off that balance, as well as keeping up with monthly payments: defaulting on a minimum often means losing that vaunted 0 percent rating.

The prospect of transferring debt is also very attractive. Accounting for balance transfer fees, you could theoretically move certain types of debt from one high-interest card to the interest-free card to help pay off your debt faster, but this carries its own dangers. For example, opening a new credit card prior to applying for a large loan can damage your chances of being approved for the larger amount.

It is up to individual consumers to mitigate their own spending and stay within their limits. However, Michigan residents know all too well that emergencies can arise that require you to rely on credit, which can result in credit card debt accruing. In some cases, researching your eligibility for bankruptcy may be a better choice than relying on short-term solutions to lower existing debt. In any case, while 0 percent cards and other incentives can help you build a plan to lower your debt levels, it is important to look at all the options before jumping on what appears to be a "quick fix."

Source: The News Tribune, "Do those 0 percent credit card offers mean free money?" Susan Tompor, May 8, 2013

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