Credit cards can be great for providing ready access to credit for those times when you need to pay an unplanned for expense, like a car repair. You can easily pay the bill and, if necessary, make payments until you pay it off. Of course, that easy credit can lead to other issues, because sometimes that easy credit is just too easy.
Many consumers get into trouble with credit card debt by falling prey to the temptation of just paying the minimum payment on their monthly credit card statement, rather than paying off the full balance. While letting this happen once and awhile may work, over the long run, it can lead to overwhelming credit card debt and the need for solutions like bankruptcy.
A recent New York Times post discusses transferring your car loan to a credit card with an interest free balance transfer. For some people, this may enable them to save a few hundred dollars in interest charges, but it is dangerous for many.
If you fail to pay off the full balance when your interest free period expires, you are subject to all of the interest charges and they typically are much higher for the credit card than your car loan’s rate.
We suspect some of our clients fall prey to using one credit card to off other credit cards. This strategy is like using one bucket with a hole in it to collect water from another bucket with a hole. Eventually, you just run out of water.
Before things become that desperate, give us a call and let us help determine if bankruptcy can help you salvage your finances.
Source: New York Times, “The Risks of Transferring a Car Loan to a Credit Card,” Ann Carrins, March 18, 2013