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credit & debt

Using Balance-Transfer Cards to Pay Holiday Bills

Interest-free balance-transfer offers are back and better than ever -- if you weigh your options first.

I've received several offers from credit card companies recently to transfer my existing account balance to a new card interest-free. I'd like to take advantage of one of these 0% balance transfers to pay off my holiday bills. Is there a catch?

A balance transfer can be a great way to pay off your bills, but you need to weigh the offers carefully. Most cards charge an upfront transfer fee of 3% to 4%, says Bill Hardekopf, of LowCards.com, so it would cost $300 to $400 to transfer a $10,000 balance. That makes sense only if the transfer fees are less than what you expect to pay in interest on your existing balance.

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After a hiatus during the economic downturn, interest-free balance-transfer offers are back and better than ever. Most cards charge no annual fees and offer lengthier introductory periods -- some as long as 21 months -- during which you pay no interest. But you're likely to get one of these tempting offers only if you have a stellar credit score. Be aware that if you use the card for new purchases, you will incur interest charges unless you pay off the purchases in full during the billing cycle. And pay close attention to the length of the introductory period. The interest rates on these cards can jump as high as 20.99% after the teaser rate expires.

But before you jump on a balance transfer offer, you can try to use it as leverage to get your current credit card company to lower your rate. Then you may be able to avoid switching cards -- and the balance-transfer fee altogether -- says Scott Bilker, founder of DebtSmart.com.

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