Plastic promotions may be bad news for debtors

College Press Service

Have you been teased?

The offers on teaser rates -- the low introductory rates on credit cards -- are as low as 5.9 percent from some financial outfits in the nation, but if you're not careful, these credit cards won't help you reduce your interest payments if you carry a balance. That's because the interest at the end of the introductory period will likely wipe out any early savings. So, you may end up paying more in interest in the long run.

The ugly news is that credit card balances still are growing. In fact, according to the Bankcard Holders of America, the total amount of outstanding debt that Americans carry on plastic is $415.7 billion in 1995, compared to $337 billion in 1994. That's an increase of $78 billion in just one year -- the largest increase since 1980. The average amount of debt per cardholder is $3,900 in 1995.

That's a lot of plastic for consumers, but it hasn't stopped the industry from crafting new ways to capture more credit card customers, especially using the low-introductory rate strategy. One of the lowest introductory rates in the nation is from Riggs National in Washington at 5.9 percent. But after six months, the rate jumps to prime plus 7.15 percent.

For people who carry a balance from month to month, the rate of interest is the primary concern. Many credit cards offer the low teaser rates at less than 9 percent. However, these "deals" only last six months to a year. In most cases, the rate will double when the promotional percentage expires. The bottom line? Card companies bank on customers forgetting about the hike.

Tip: Look for a teaser rate that lasts at least a year. That's enough time to put a dent in your debt.

Other things you need to consider before signing up with a new low-introductory rate:

*If you are looking to transfer your balance, some credit card issuers don't allow transfers to teaser-rate offers from department store cards. Others limit the amount you can transfer, and still others restrict the number of transfers you make.

*Most issuers base interest charges on the average daily balance. If you find a credit card that excludes purchases made during that billing cycle, it's usually a good deal.

*Every credit card application must disclose the terms of the annual interest finance charges, membership fees and other important information. Check this out; this information will help you determine how much a card will cost you and how it stacks up against other products on the market. So ignore the bold print on the front of the envelope and go directly to the fine print located on the back.

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