The moves to make now…

Hidden fees, high interest rates and penalties can make credit cards extremely expensive. Tricks to help you cut costs and even come out ahead…

SEEK 0% RATES

Credit card companies aggressively market introductory rates as low as 0% for the first six or 12 months. The interest rates then increase, sometimes dramatically. To win this game, shift your balance away from one introductory-rate card and onto another shortly before the low-rate period ends. Jumping from card to card can keep your rates low forever.

Watch for these low-intro-rate offers in the mail, or find them on-line at Bankrate.com or on my own site, CardRatings.com. Caution: Don’t enter any personal information on-line unless you are filling out an application on the card issuer’s own site — and you see “https” in the Web browser address line, which indicates that the site is “secure.”

To make intro-rate flipping work…

Choose cards with introductory periods of at least 12 months. Switching cards more often is a headache. It could also hurt your credit rating because each time you apply for a new credit card, you trigger a credit inquiry, which could lower your credit score.

Avoid cards with high balance transfer fees. There often is a fee to transfer a balance to a low-intro-rate card. It typically is worth paying this fee only when transferring a four-figure or larger balance, and only when the fee is capped at no more than $100. Note: The “catch” in many of these offers is that there is no cap on the transfer fees.

  • Example: Many card companies charge a 3% balance transfer fee with no cap. Therefore, if you’re moving a large amount of money, the transfer fee may negate the 0% introductory rate.

Follow the card’s rules to the letter. Your low introductory rate could turn into a much higher “default rate” if you are even a single day late with a payment. Set up automatic payments or pay your bill the day it arrives, to avoid problems.

There is some danger that you could get stuck with a big balance on a high-rate card if you cannot qualify for another low-rate introductory offer before your current one expires. If you prefer a simpler, lower-risk approach, apply for a card that offers a low fixed interest rate for the life of the transferred balance.

  • Example: Blue from American Express has a 4.99% fixed rate if the transfer is submitted at the time of application (800-223-2670, www.americanexpress.com).

DOUBLE UP

There’s no rule saying that you can have only one credit card from a given card issuer. In fact, it may be to your advantage to have more than one.

If you receive a very appealing card offer from a credit card issuer with which you already have an account, go ahead and apply. If you are approved and are given a low credit limit on the second card, ask the card issuer to “reallocate” your credit limit from the card with less attractive terms to the one with more attractive terms. Reallocation is not an application for new credit — it’s just a consolidation, so the card issuer often will do this without even performing an additional credit check. Some issuers won’t grant a reallocation, so ask before you apply.

  • Example: You have a $10,000 credit limit on a Discover More Card (800-347-2683, www.discovercard.com) that charges a 17.99% interest rate, and you are approved for a $2,000 credit limit on a new Discover More Card with a 12-month introductory rate of 0%. Have most or all of your credit limit from the original card reallocated to the low-rate card.

Inexperienced customer service reps sometimes do not understand what customers mean by credit reallocation. If you have trouble, ask to speak with someone in the credit or balance-transfer department, and if that fails, ask to speak to a manager.

BUYER PROTECTION

Some cards provide buyers with various types of protection for purchases of items, but few cardholders take advantage…

Price protection. Citi Diamond Preferred Card (800-456-4277, www.citicards.com) offers this guarantee for most non-Internet items. If you buy an item with the card, then see it advertised in print within 60 days for less than the amount you paid, you will get a refund of up to $250.

Purchase security. If a covered item purchased with a card that provides this guarantee is accidentally damaged or stolen within 90 days, you are covered up to a certain dollar amount.

  • Example: Chase Visa cards cover up to $500 per occurrence (877-682-4273, www.chase.com).

Return protection. If you try to return a covered item within 90 days and the store won’t take it back, you can get a refund for the purchase price up to certain limits.

  • Example: American Express provides refunds up to $300 per item and up to $1,000 annually.

GET CASH BACK

With rewards cards, the credit card company pays you for your business.

There are many different types of rewards cards. Cash-back cards, which give you a cash rebate ranging from 1% to 5% of what you spend, provide the most useful reward and tend to be the easiest to use.

Examples: Blue Cash from American Express is a great cash-back card for big spenders, but the best rate — 5% rebates for categories such as groceries and gasoline — does not kick in until you spend $6,500 each year. Chase Freedom Visa is a better choice for those who use their credit cards less frequently. It rebates 3% for each of three categories in which you spend the most in a given month and 1% on all other purchases.

To make cash-back cards work...

  • Do not carry a balance on these cards. They usually have high interest rates.
  • Select a cash-back card that matches your spending habits. Some provide more cash back on gas purchases, others at specific merchants.
  • Read the fine print to find out if the program caps your annual cash reward, and stop using the card when you reach the cap.
  • Do not let the rewards encourage you to spend more than you otherwise would.

Frequent-flier cards are less appealing. Today’s crowded flights make rewards seats difficult to obtain.

Exception: A card that offers a large number of miles up-front just for signing up for the card (or soon thereafter) might be worth applying for. You may even be able to cancel the card as soon as you receive your miles and before any annual fees begin.

Example: Citi Gold/AAdvantage World MasterCard offers 15,000 miles on American Airlines if the cardholder spends just $750 in the first four months. It has no annual fee in the first year.

NEGOTIATE TERMS

Most card issuers will agree to a payment plan or other special terms for a customer suffering a financial setback.

Call your card issuer when you realize that you are not going to be able to make a payment. Explain your financial situation and politely ask the issuer to work with you on a payment plan.