A few years ago, it seemed that credit card offers had all but dried up. These days, mailboxes are once again being flooded with offers touting 0% interest rates.
Credit card solicitations this spring are up a whopping 18.5 percent since the last quarter, according to new research from the Mintel Group.
At first glance, it may look like consumers have won back the upper hand - but that's mostly an illusion, explain our bankruptcy attorneys.
For borrowers - especially those of us who substantially added to our credit card debt during the recession - the promise of 0% APR is awfully alluring. In theory, transferring a balance from a card with a high rate to one with no rate at all should save money by eliminating interest charges.
In reality, these offers come with a catch - usually in the form of various fees.
While you may not be paying interest, you'll likely pay a balance transfer fee - on average, 3 percent of your balance - to switch cards. That means that transferring a $20,000 debt will cost you $600, which may exceed any potential savings.
Even the benefits of zero percent are fleeting. Once your introductory period is over, your interest rate could skyrocket beyond what you were paying before. Additionally, any slip-up - be it a late payment or just exceeding your credit card limit - could be grounds for the bank to revoke your 0% rate before it expires. And don't forget that every time you apply for a new credit card, your credit score takes a hit. The more debt you have, the more you'll get dinged.
If you're not careful, transferring your balance could land you right back where you started: Carrying too much debt on a credit card with an outrageous interest rate.
When you file for bankruptcy, the benefits are immediate. An automatic stay prevents creditors from contacting you and protects personal property, including your home. Wage garnishment is halted. And while bankruptcy can lead to an initial drop in your credit score, once you've discharged debt your credit will begin climbing.
Continuing down the same path that led to debt in the first place won't change your situation. But bankruptcy can.
Bankruptcy certainly isn't something to be taken lightly. But for many folks, bankruptcy offers what other methods don't: a chance for real and lasting financial freedom.