0 Intro APR credit cards are used by many people to avoid high interest rates
on outstanding balances. As soon as the 0 Intro period expires - they find another
credit card with 0 intro offer or low interest offer on balance transfer and
switch balances. In the short term it might look as a good strategy, but it
has its own drawbacks. Here are few facts, which if overlooked can cost the
credit card holder dearly.
- The credit card companies might stop approving such applications when they
find that the applicant has a sustained history of balance transfer misuse.
- Lenders like people who pay them interest, that's the main source of their
income. So, if the find that when it comes to repaying your debt with interest,
you simply cut corners and transfer the balance to a new credit card. They
won't be interested lending to you.
- With such repeated balance transfers, and closing old credit cards will
have an impact on your credit history also. The remarks in your credit report
can drive away potential lenders, and you'll have to face the music even when
you apply for other type of loans like auto loan, mortgages, personal loans
- If a credit card issuer refuses one such request of balance transfer, your
entire plans of getting the debt to a low interest rate can be jeopardized
and you could be facing high APR's, which can land you in further trouble.
- Balance transfer credit cards don't tolerate late payments, so if you miss
out on a particular repayment all the benefit is lost and instantly the high
regular APR's are applied. Again a low rate on balance transfers does not
mean the overall APR's will also be low. There could be different APR's for
purchases, and cash advances.
Though balance transfers are not a bad idea, but excess of everything is bad.
Besides, denting your credit history, repeated balance transfers are also a
bad financial habit. It is like not facing the eventual reality of repaying
your debt. Balance transfers are there for good reasons and should be used as
such- in that way they will benefit the credit card holders in a big way.
Continually opening new low interest credit card accounts and shifting money
without attacking the overall debt could worry lenders, potentially hurting
your chances for borrowing money in the future. Credit card issuers favor customers
who pay interest, viewing customers who transfer debts over and over to avoid
paying interest as less-than-ideal borrowers.
Such excessive balance transfer behavior can also make it tough to borrow money
from other lenders outside of the credit card industry, such when shopping for
a home or automobile.
Separately, should you make a misstep -- for example, by making a late credit
card payment -- your credit card's regular (and undoubtedly much higher) interest
rate will get triggered. That could also result in a sudden surge in the APR
on your credit card debt.
Another reason to be wary of performing too many balance transfers is that
the low interest rate you get with a new balance transfer credit card may just
apply to the transferred balance itself. It is important to note whether the
low interest rate on balance transfers also applies to purchases.
Should you need to make a new purchase with the card, the interest on your
spending could be at the credit card's regular interest rate. However, certain
balance transfer credit cards, like the Discover Platinum Card and the Citi
Platinum Select Card, offer low introductory APR's on both balance transfers
Meanwhile, be aware that with a balance transfer credit card, all the payments
you make will likely first be applied to the 0% portion of your debt. As a result,
any other credit card spending will accumulate interest until the transfer is
paid off and you can then tackle the most recent charges.
However, all these warnings do not mean that a credit card balance transfer
is always a bad idea. In fact, balance transfer credit cards can really work
in your favor if used sparingly. If you don't go overboard with transferring
balances, and pay attention to any balance transfer fees your credit card may
carry, transferring your balance to a lower interest credit card can be an excellent
way to save yourself some money as you pay down your debt.