Are Low Interest Credit Cards a Bankruptcy Alternative?
Does it brighten your day when you get one of those low interest credit card offers in the mail? You know, the one's that say you have been "pre-approved" for a fabulous low interest offer.
If you have a lot of debt, it is very tempting to jump with joy when you receive one of these offers in the mail. You think, great, I can transfer the balance from my high interest credit card to this new low interest credit card, which will lower my monthly payments, and help me pay off my debts faster. This form of debt consolidation saves you money and helps you avoid bankruptcy.
Yes, it's a great deal, but it can backfire. First, the low-interest rate is only for a "limited time", usually the first six months. At the end of six months you may find yourself paying an even higher rate than you were paying on your old credit card.
Second, transferring a balance only makes sense if you cut up your old credit card. Most people get the new card, but keep using the old card, so they end up with twice as much debt as they had before! Instead of the new card being a bankruptcy alternative, it actually increases your chances of going bankrupt, because now you have even more debt!
A low interest credit card is only a bankruptcy alternative if you are disciplined enough to stop using your old cards. Pay down debt, don't increase it, or you may find yourself filing for personal bankruptcy.
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