Play the Field

Lenders use the lure of single-digit interest rates as a tool to get you to sign up for their cards. (Hey, we're guilty as charged, too! Though we think The Motley Fool Visa has a lot of other lovely qualities besides the low interest rate.)

We thank lenders from the bottom of our hearts for these enticing deals. Used Foolishly, they actually make credit cards a tool for getting out of debt, instead of a drill that drives us deeper under. By transferring a balance from a higher-interest rate loan to a low-interest rate card, you can effectively shave hundreds -- or thousands -- of dollars from your loan.

But there are many cautionary notes on such deals:

Make sure the offer fits. What kinds of balances does the low-rate offer apply to? Balance transfers? New purchases? If you plan to use the card to move an existing balance over, make sure the balance you transfer falls within the credit limits of the new card.

Find a low rate that lasts. The best offers are ones where the rate applies for the life of the transferred balance. But those are rare. So look for one that lasts for a reasonable period of time. Six months is a good starting point.

Make sure you qualify. The best place to start looking for a better deal is in your wallet. Start with your current lender and negotiate for a lower interest rate. If you don't get a satisfactory one, shop around. Lenders are tightening their requirements for the best deals. Still, competition is fierce.

Be diligent about paying your bill. Make minimum payments (hopefully more than the minimum amount due) on time, or else you can pretty much kiss that low rate good bye. Lenders are always looking for a way to eke out more money from you -- whether through interest or late/penalty fees. Late payments are just one more reason for them to hike up that interest rate.

Avoid putting new charges on the card. Chances are new purchases are subject to a higher interest rate. Plus, they will be the last charges your payments will be applied to. That means that if you take your time paying off the 10 grand but put another few grand on the card at, say, 14% interest, your payments won't touch the new charges until the old, lower-rate ones have been paid down. You don't want to be accruing interest on those new charges for any length of time.

Line up new credit ASAP. If you plan to move any remaining balance over to a new credit card once the special rate expires, make sure you have someplace to roll your balance. Also, consider closing the old one. You don't want to have too much credit available in the eyes of the lending industry -- you might make a run for the hills.

Check out our Credit Center for more tips on maximizing your credit score and attacking debt.

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