A Suze Orman exclusive

Coddle Your New Card
When you do a balance transfer, you need to protect your low rate as if it were an endangered species—because if the credit card issuer has anything to say about it, it will be. Look, you don’t really think the card company is excited about charging you no interest, do you? How the heck do they make money off of that? They only offer up the great deal to lure you over to their card. Then they start working overtime trying to get you to screw up so they have an excuse to change your zero interest rate, often to as much as 20 percent or more.

And the big screw-up they are hoping you don’t know about is buried down in the fine print of your card agreement: make one late payment and you can kiss your zero deal good-bye. Even worse is that card companies are now scouring all your credit cards—remember, they can check your credit reports—to see if you have been late on any card, not just their card. So even if you always pay the zero-rate card on time, if you are late on any other card, your zero deal can be in jeopardy.

That’s why I want you to make to make sure every credit card bill is paid ahead of schedule. Don’t mail it in on the day it is due; that’s late. Mail it in at least five days early. Better yet, convert your card to online bill pay so you can zap your payments over in time every month. And remember, it’s only the minimum monthly payment that needs to be paid. That’s not asking a lot.

When You Can’t Zero-in on a Better Deal
If your FICO score is a good bit below 720, you’re not going to get a zero-rate deal. At least not right now. But you can definitely change your credit profile and qualify down the road if you make the moves that will boost your score.

The first and most fundamental thing is to make your minimum monthly payment on time every month. That is the single biggest way to impress the credit score folks. After awhile, your record of paying on time is going to begin raising your FICO score.

Of course, it will also help to start paying down your balances, so your overall debt-to-available-credit ratio declines. This is another big factor in figuring your FICO score: the higher your ratio, the lower your score. For example, let’s say you have a combined $5,000 in balances on three cards. And those three cards have a combined credit limit of $15,000. That means your debt-to-credit limit is 33 percent. If you can get your balance down to $4,000, your ratio falls to 26.7 percent. Keep getting the ratio lower and your FICO score will begin to move higher. (By the way, another tactic is to call up your credit card issuer and ask for your credit limit to be boosted. If your balances stay the same but your total credit limit rises, your ratio is going to fall. However, I am not suggesting that anyone with a spending problem take this route! The only time you should try this gambit is if you are convinced you will not run up more charges once your credit limit is raised.)

Dealing with High-Rate Debt
Okay, I realize not everyone is going to qualify for these low-rate balance transfer deals, so let’s run through how to take control of your cards if you are stuck with higher rates.

I want you to line up all your cards in descending order of their interest rates. Notice I said the card with the highest interest rate comes first. Not the one with the biggest balance.

Your strategy is to make the minimum monthly payment on every card, on time, every month. But your card with the highest interest rate gets some special treatment. I want you to pay more than the minimum amount due on this card. The more you can pay, the better; but everyone should put in, at the minimum, an extra $20 each month. Push yourself hard to make that extra payment as large as possible. It can save you thousands of dollars in interest charges over time.

Keep this up every month until your card with the highest rate is paid off. Then turn your attention to the card with the next highest rate. In addition to the usual monthly minimum payment due on that second card, I want you to add in the entire amount you were previously paying on the first card (the one that’s now paid off). So let’s say you were paying a total of $200 a month on your original highest-rate card, and making a $75 monthly minimum on the second card. Well, now you are going to fork over $275 a month to the second card. And, of course, you’ll continue to make the minimum monthly payment due on any other cards. Once your second card is paid off, move on to the third. If your monthly payment on that second card was $275, then that’s what you should add to the minimum payment due on your third card. Get the idea? Rinse and repeat as often as needed, until you have all your debt paid off. For some of you this may take a year, for others it may take many years. That’s okay. Just get yourself moving in the right direction and you’ll be amazed how gratifying it is to find yourself taking control of your money rather than letting it control you.

And be sure to keep an eye on your FICO credit score. As you pay down your card balances—and build a record of paying on time—your score is indeed going to rise. Eventually your score may be high enough to finally qualify for a low-rate balance transfer offer.