Cheeky credit card balance transfers could hurt later
Ah, you cheeky little card tart you. You're probably reading this because you're one of those people who know what a 'card tart' is. You may have been serially transferring your balance from card to card for years, taking advantage of all of those scrumptious 0% balance transfer offers, and let's face it, becoming addicted. It has got under your skin and into your blood and you just can't give up. After all why pay interest when you can just transfer again and get another X months free? Unfortunately the fact of the matter is that credit card companies are wising up and it's becoming more and more difficult to do this kind of thing. Heed well this warning!
People often change their existing credit card balance to a new credit card for two reasons. Firstly the interest on your existing card may have got too high and now your repayments are hardly touching the amount you owe. Secondly you have seen an excellent 0% credit card balance transfer offer on another card and want to take advantage of it. 0% balance transfer periods mean what it says on the tin; you do not pay any interest on the amount that you owe. The length of time that the transferred balance remains free varies but the average has now hit around 10 months.
A sign that credit cards were beginning to wise up came along in 2004 when a major credit card company introduced credit card balance transfer fees. Nowadays these fees are around 3% of the balance you want to transfer; transfer 1000 and you will be charge 30. The fee was introduced because it was estimated that switching cards was costing credit card companies up to 1 billion a year in administration costs and other financial losses. With that kind of money disappearing into the ether credit card companies simply couldn't afford not to do something. Unfortunately (or fortunately depending on which side of the fence you're on) this didn't seem to stop anyone.
This is all fine and good you say but what on earth is a credit rating, history, or score? Well, they are all the same thing. Rating and score a bit misleading, although in common usage, as they imply a figure i.e. so and so has a credit rating of 6.4, imagining that it is similar to the scoring systems in say ice skating championships. This isn't the case. History is a better term as it is in fact a vast document detailing all associated credit related action. It includes your name and address, culled from the electoral roll, cards you have applied for, whether you were accepted or declined, credit limits given and so on. It also details repayments you have made and, more importantly to credit companies, missed.
So what's the deal? Yes you can by all means transfer from card to card in order to take advantage of those lovely 0% credit card balance transfer offers but you must remember that it is recorded on your credit history. In the future this can affect new card applications. Is there a way around this? Well you could possibly make sure that the rest of your rating is as perfect as possible. Or you could throw the odd purchase on the card whilst paying off the balance. You could even keep hold of the card for a while after the 0% period ends just to make all of the credit companies happy. In the end it is entirely up to you - but you have been warned!
People often change their existing credit card balance to a new credit card for two reasons. Firstly the interest on your existing card may have got too high and now your repayments are hardly touching the amount you owe. Secondly you have seen an excellent 0% credit card balance transfer offer on another card and want to take advantage of it. 0% balance transfer periods mean what it says on the tin; you do not pay any interest on the amount that you owe. The length of time that the transferred balance remains free varies but the average has now hit around 10 months.
A sign that credit cards were beginning to wise up came along in 2004 when a major credit card company introduced credit card balance transfer fees. Nowadays these fees are around 3% of the balance you want to transfer; transfer 1000 and you will be charge 30. The fee was introduced because it was estimated that switching cards was costing credit card companies up to 1 billion a year in administration costs and other financial losses. With that kind of money disappearing into the ether credit card companies simply couldn't afford not to do something. Unfortunately (or fortunately depending on which side of the fence you're on) this didn't seem to stop anyone.
This is all fine and good you say but what on earth is a credit rating, history, or score? Well, they are all the same thing. Rating and score a bit misleading, although in common usage, as they imply a figure i.e. so and so has a credit rating of 6.4, imagining that it is similar to the scoring systems in say ice skating championships. This isn't the case. History is a better term as it is in fact a vast document detailing all associated credit related action. It includes your name and address, culled from the electoral roll, cards you have applied for, whether you were accepted or declined, credit limits given and so on. It also details repayments you have made and, more importantly to credit companies, missed.
So what's the deal? Yes you can by all means transfer from card to card in order to take advantage of those lovely 0% credit card balance transfer offers but you must remember that it is recorded on your credit history. In the future this can affect new card applications. Is there a way around this? Well you could possibly make sure that the rest of your rating is as perfect as possible. Or you could throw the odd purchase on the card whilst paying off the balance. You could even keep hold of the card for a while after the 0% period ends just to make all of the credit companies happy. In the end it is entirely up to you - but you have been warned!
About the Author:
John Evens is a financial writer based in London. He writes for popular financial-based websites and likes to provide indepth credit card information to consumers. Find out more about compare credit card and the UK card here.
posted by Credit Counseling at
1:32 AM
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