Apply card credit target

The author is a business writer in Bethesda, Md.

Small-business owners make up a major segment of the market for companies offering attractive credit-card terms. "Credit-card issuers are targeting these people because they know they have a voracious need for money-as start-ups and just to keep going," says Steve Rhode, president of Debt Counselors of America in Rockville, Md. As a result, he says, "all too many small businesses are becoming overwhelmed with debt related to easy lines of credit as well as card purchases."

He cites as an example the owner of a small service company in Dallas who piled up $75,000 in credit-card debts and has barely enough money to keep making the minimum payments each month.

"If you just make the minimum payment, it can take as much as 30 years to pay everything off," says Geri Detweiler, a credit-card consultant in Woodbridge, Va., and author of Invest In Yourself (Wiley, $22.95).

According to figures supplied by the Consumer Federation of America, by the end of the year banks will have mailed out 3.2 billion offers to prospective card customers-up from 3 billion last year and 2.4 billion in 1996. "This is the most aggressive credit marketing I've ever seen," says Debt Counselors' Rhode, adding that "there are lenders out there who will give you all kinds of quick credit."

A typical invitation letter says you have been pre-approved for so many thousands of dollars in new credit, and the introductory interest rate is 3 to 4 percent. "You get that rate for six months," says Detweiler, "then, bingo- it jumps to 15, 18, even 20 percent." The card issuers, she explains, are betting that once they sign you up, you'll stick with them no matter what rate you eventually pay.

While a barrage of credit-card offers can drive you deeper into debt, says Detweiler, it can also be used as a tool to reduce card balances systematically so you can get out of debt. It's called "card surfing," and it works along these lines:

You are invited to apply for a low-interest-rate card with an opportunity to transfer your balances from current high-interest cards. You complete the application and make the switch. You start paying down your new, consolidated balance, doubling the minimum you were paying on the old balances.

It's crucial that you take advantage of the lower interest rate to pay more each month to reduce your overall debt. When the low initial rate is about to increase, you can move to another low rate card if one is offered to you. Or you might be able to negotiate a lower fixed rate before the low introductory rate is phased out.

Be sure to mail in your specified monthly payments with plenty of time to spare. If payments arrive just one day late, card issuers can increase the rate substantially-to as much as 21 percent in some instances-and may also charge a late-payment fee.