Q: I owe about $5,000 on four credit cards that charge interest rates of 16.5 percent to 18 percent. I've been trying to pay them off, but most months, I just pay the minimum amount, but always on time.
I recently read your column about low-rate credit cards and figured that if I could get an 8 percent or 9 percent card I could save almost $500 a year in interest charges.
My question is: What do I do about the $5,000 I still owe? Is there any way to transfer my balance to the new card at the lower interest rate?
A: There are two ways of switching your balances to the new card -- after you're approved, of course: Take a cash advance and pay off the old balances, or have the new issuer arrange the transfer, assuming, of course, that your new credit limit covers your outstanding balances.
Some credit card issuers offer transfer assistance by supplying you with authorization forms, so they can do the transfer automatically. Others offer checks that can be used to pay off the high-rate credit card balances.
If the card you choose offers neither of these two conveniences, you can still get a cash advance, deposit it in your checking account, and use your personal checks to pay. This is the most awkward choice since it involves handling a large amount of cash.
But there are pitfalls to watch out for:
* Some credit cards charge transaction fees on cash advances. These charges can range up to 2 percent of the amount borrowed, greatly reducing the benefit of consolidation.
* Some credit cards impose higher interest rates on cash advances than on other charges. So ask before you apply.
There are some steps you can take before contacting the issuer of your choice to put your application in the best light.
* Close any credit card accounts or lines of credit that you are not using. Contrary to popular belief, having lots of cards can hurt your chances of getting new credit. Most conservative lenders will look at those and assume you will max out on each one.
* Pay off those cards that have the smallest balances, and then close those accounts. Most lenders would rather see a $2,500 balance on two cards than a $1,000 balance on five cards.
* Don't apply for more than two cards at a time. Inquiries appear on your credit report each time you apply, and numerous entries might be interpreted as a red flag -- an indication that you're in financial hot water and need more credit.
Although some creditors might view your large outstanding amount as a negative, others will view your timely monthly payments positively.
Keep in mind that many of the financial institutions that offer low interest rates on their cards have more conservative criteria for approval.
Credit unions, on the other hand, often make low-interest or no-fee cards with less stringent requirements available to their members. So do your homework, and put your best foot forward.
Susan Bondy founded her namesake financial services compan 1980 to provide financial planning and asset management. She is a frequent guest on "Good Morning America," the "Today" show and National Public Radio. She is the author of "How to Make Money Using Other People's Money." Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore 21278. All letters will be treated confidentially.