Balance transfers are often advertised in both Oregon and Washington with an offer of radically reduced introductory rates for borrowers who are willing to move their balances onto a new credit card. Additional credit cards though are almost never the answer for managing debt. In fact, they usually exacerbate the problem. Many people keep their existing credit card accounts open, amassing even greater debt. Balance transfers do not address the core issue for most debtors: insufficient income to reduce existing debt. In contrast, Chapter 7 and Chapter 13 bankruptcies are effective because they address the root cause by eliminating or reducing the total amount of debt.
The dangers presented by balance transfers are usually found in the small print. Low preliminary interest rates are used to get people to transfer their balances onto one credit card, and often seem so attractive that the concealed fees and costs are difficult to detect let alone understand. The low interest rate usually lasts for only a limited amount of time. Soon the introductory interest rate rises, sometimes to a higher rate than that of the original credit card. The low introductory rate period is often cancelled if the borrower makes any late payments on the account. The interest rate offered may only be applicable to balance transfers, and a different interest rate will be applied to all cash advances and purchases. Usually, payments made will be applied to the lower balance first, leaving the balances with the higher interest rates continuing to rack up interest.
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Posted in Bankruptcy Information | By: Thomas McAvity
