Mellody Hobson: Credit Card Woes

Nov. 20, 2005 — -- Credit card debt. Ick. Most Americans have it. In fact, the average American carries more than $9,000 of credit card debt … and growing.

So what do you do to get those cards paid off and keep them paid off? "Good Morning America" Financial Contributor Mellody Hobson answers a few credit-related questions and offers tips on how to get control of your credit card debt before it gets control of you.

Q: Are there any low-rate cards you would recommend?
Although I recommend paying off your credit-card balance each month, the interest rate your credit card charges, known as the annual percentage rate, plays an important role if you ever do maintain a balance. The average credit card APR in the United States is 13.37 percent (Americans have $9,312 in credit card debt -- according to cardweb.com). However, more than half of the states in the United States have no cap on the amount a credit card company can charge a consumer.

A few suggestions:

Capital One Platinum: Prestige -- Ongoing Interest Rate: As low as 5.90 percent.
Introductory APR: Same as ongoing.
Balance Transfer Rate: Same as ongoing.
Annual Fee: None.

Discover Card Miles Card -- Ongoing Interest Rate: As low as 9.99 percent.
Introductory APR: As low as zero percent for 12 months.
Balance Transfer Rate: As low as zero percent for 12 months, then same as ongoing.
Annual Fee: None.
Also: Offers airline mile rewards program.

American Express One Card -- the One Card does not have a low APR (between 12.99 and 14.99 percent), but it is a terrific card to use for spending and saving. The American Express One Card is linked to a FDIC-insured high-yield savings account. With all eligible purchases, 1 percent will be automatically deposited into this savings account. The card carries an annual fee of $35.

Should you transfer your balances to the card with the lowest APR?
I am never very enthusiastic about transferring balances from one credit card to another because it often creates a false sense of security for individuals and prompts people to spend again on the old card. Additionally, you need to be careful of introductory zero percent rates which could balloon to rates higher than your previous card following a six-month grace period.