Can card jumping be hazardous to your wealth?
Once you've enjoyed the 0% honeymoon period with your credit card, the APR kicks in and interest payments start to mount. Smart credit card customers have been working the system by transferring the outstanding balance left to a new 0% offer, taking advantage of yet another interest-free period. By doing this a card-sharp customer can end up paying little or no interest on outstanding balances, actually paying off the loan rather than paying interest. But this practice has caught the attention of the card lenders, and they're not happy about the system being abused.
Card jumping can affect your credit rating. It's a common misconception that those who build up a debt on their credit card and pay high APR are the ones that are most likely to be rejected for future credit or have a poor credit rating. The truth is that the card companies love these customers, as the interest they pay keeps the credit card lenders in business. It's the ones who attempt to beat the lenders at their own game by repeatedly taking advantage of 0% offers time and again that are at higher risk of ending up with a lower credit rating and a handful of potentially damaging rejections, lessening their chances of obtaining any kind of credit.
A credit rating has all the appearances of secretive whisperings between banks and credit card companies, but the truth is you can take control of your credit rating and improve the chances of being accepted for credit. By applying to the three credit agencies, you can (for a small charge) receive a detailed copy of your credit report. This will detail your financial history and give you the same information that the banks and credit lenders hold on you. This information can be inaccurate, so it's a worthwhile exercise to carry out just in case there are mistakes or errors that are directly affecting your credit rating. That rating can be directly affected by instances of multiple card jumps, so be prudent how you use the opportunities to transfer balances between lenders.
Many credit card lenders have multiple outlets so 'blanket' application (applying to several credit cards at the same time in the hope that one of them accepts your application) is inadvisable, as it will be spotted straight away by the lender. A cluster of rejections can lead to 'Black data' being added to your credit rating, lessening your chances of obtaining credit in the future. Credit ratings are affected by many forces, both the mundane such as address and occupation, and the more complex, such as how you manage your money. How you conduct your financial affairs leaves a paper trail that is easily traced by credit companies who, in the current economic climate, are tightening their criteria for lending.
It is generally agreed that the best policy with 0% deals is to look for one that offers a long introductory period. This stops you from having to move your outstanding balance to another card every six months or so, thus reducing the chances of being labelled by lenders as a card jumper. There are offers ranging from nine to 16 months available, but read the small print as the longer offers may incur higher credit card balance transfer charges. By moving to a card with a longer 0% interest period, you can build up your reputation for customer loyalty, improving your credit rating in the process. It also gives you the opportunity to pay off a larger amount of the outstanding balance at 0% interest. If, at the end of the 0% period you transfer to a new card, the credit card balance transfer will be smaller and have more chance of being accepted by a new lender.
The 0% offers aren't there to encourage card jumping - they're designed to pull in new, long-term customers. By taking advantage of these offers you could considerably reduce your debt and avoid paying interest charges, but be warned. Doing it too often can draw the attention of the lenders and damage your credit rating. Use the offers wisely and you could improve your financial situation considerably.
Card jumping can affect your credit rating. It's a common misconception that those who build up a debt on their credit card and pay high APR are the ones that are most likely to be rejected for future credit or have a poor credit rating. The truth is that the card companies love these customers, as the interest they pay keeps the credit card lenders in business. It's the ones who attempt to beat the lenders at their own game by repeatedly taking advantage of 0% offers time and again that are at higher risk of ending up with a lower credit rating and a handful of potentially damaging rejections, lessening their chances of obtaining any kind of credit.
A credit rating has all the appearances of secretive whisperings between banks and credit card companies, but the truth is you can take control of your credit rating and improve the chances of being accepted for credit. By applying to the three credit agencies, you can (for a small charge) receive a detailed copy of your credit report. This will detail your financial history and give you the same information that the banks and credit lenders hold on you. This information can be inaccurate, so it's a worthwhile exercise to carry out just in case there are mistakes or errors that are directly affecting your credit rating. That rating can be directly affected by instances of multiple card jumps, so be prudent how you use the opportunities to transfer balances between lenders.
Many credit card lenders have multiple outlets so 'blanket' application (applying to several credit cards at the same time in the hope that one of them accepts your application) is inadvisable, as it will be spotted straight away by the lender. A cluster of rejections can lead to 'Black data' being added to your credit rating, lessening your chances of obtaining credit in the future. Credit ratings are affected by many forces, both the mundane such as address and occupation, and the more complex, such as how you manage your money. How you conduct your financial affairs leaves a paper trail that is easily traced by credit companies who, in the current economic climate, are tightening their criteria for lending.
It is generally agreed that the best policy with 0% deals is to look for one that offers a long introductory period. This stops you from having to move your outstanding balance to another card every six months or so, thus reducing the chances of being labelled by lenders as a card jumper. There are offers ranging from nine to 16 months available, but read the small print as the longer offers may incur higher credit card balance transfer charges. By moving to a card with a longer 0% interest period, you can build up your reputation for customer loyalty, improving your credit rating in the process. It also gives you the opportunity to pay off a larger amount of the outstanding balance at 0% interest. If, at the end of the 0% period you transfer to a new card, the credit card balance transfer will be smaller and have more chance of being accepted by a new lender.
The 0% offers aren't there to encourage card jumping - they're designed to pull in new, long-term customers. By taking advantage of these offers you could considerably reduce your debt and avoid paying interest charges, but be warned. Doing it too often can draw the attention of the lenders and damage your credit rating. Use the offers wisely and you could improve your financial situation considerably.
About the Author:
As a financial writer Paul Dury enjoys breaking down the jargon and provide consumers with a clear view of the financial options available. If you would like to learn more about a credit card balance transfer you can read more here.
posted by Credit Counseling at
11:00 AM
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