After opening the envelope, one might start to sweat. The offer, in this case from Chase Card Services, heralded an announcement that seemed almost too good to be true.
"Pay off your higher-rate credit card balances with the Chase Visa Platinum Card," the parchment screamed, and pay "NO INTEREST for up to 15 months on purchases and balance transfers."
What's going on? The deals are better than ever. Why would a big-time financial firm give away free money in today's market turmoil? Experts say it's just desperate companies trying to find reliable customers in a tight economy.
"They're getting very aggressive and trying to solicit new applications from people that have very good credit," said Jim Huninghake, president of Minneapolis-based Anchor Bancorp Inc.
But 15 months of a free ride? Huninghake, who also counsels customers in credit trouble, said that's good news for anyone with an outstanding credit card balance of $2,000 or more. Great news for those $4,000 in the hole, or worse.
But this particular deal got better.
"No annual fee, no balance transfer fees," the pitch promised, with "a fixed APR of 6.99 percent" after 15 months if approved.
It can make a grown man drool. After a closer look, there were no fine-print landmines, no significant hitches to the deal. The offer is what it is, as long as you pay your monthly minimum balance.
But if you're late with one payment, it can get very ugly, very quick.
Credit card companies always reserve the right to change the account terms if a borrower fails to comply with the terms of the account. In this particular case, if the customer were to miss a payment, Chase could switch to the "default APR" up to 29.99 percent. Serious pain.
Also, with low-rate offers, a consumer who takes the bait often gives up any cash-back or rewards programs, like airline miles. The lure to pay off high balances interest-free over 15 months is seen as a reward in itself.
So, how much could a deal like this save a credit customer?
If a consumer is carrying $6,000 in debt on a credit card, over 15 months that balance can rack up about $900 in interest charges. That's according to the national average for fixed APRs, which is currently hovering above 13 percent. At 6.99 percent, the interest would be around $500.
This all leads to the question: Will this envelope appear in my mailbox? Only if you deserve it.
"They're trying to pick the best credit risks," Huninghake stressed. "They're saying, 'Boy, here's a guy who always pays his bills. Let's see if we can get him to transfer his balance over and buy some new things. And then we'll have a new long-term customer.'"
And those who may have missed a payment or two over the years?
"Anybody with bruised credit will probably have a very difficult time getting credit at any kind of a reasonable price," Huninghake added.
Huninghake said the best rates for those with the best credit are at about 6 percent. That's about 1 point above the current prime rate. So when an offer of 6.99 percent comes along – the person who opens that envelope is definitely being courted. Huninghake said such offers are good deals to jump on, "as long as you can live within your means."
In other words, use that lower-rate card to try to get out of debt, but avoid piling more purchases on the card just because there's no interest attached for a long period of time.
His bottom-line advice? It's the same for those with great credit ratings or poor ratings.
"Slow down on the spending," he said. "Try to find a cheaper rate. Try to make progress to pay the debt down and out. You can't do that if you keep using the credit cards."
