Credit card balance transfers often come with a zero percent interest teaser rate for up to 18 months, which could be enough to help you tackle your debt without paying interest. More importantly, a balance transfer does not affect your credit, and it appears on a credit report like debt refinancing. Credit card companies, however, might identify habitual offenders of the "balance transfer game." (
Identification
The credit agencies do not have a special code or designation for a balance transfer. A balance transfer makes one account balance smaller and another bigger. This looks the same as if the consumer were to pay off one account and make a purchase equivalent to the debt on the old card.
Does This Hurt Your Score?
Initiating a balance transfer has no effect on your score, because you just shift money around. What can hurt you is a hard inquiry when you transfer a balance to a new card. A single inquiry does no more than five points of damage -- negligible in the world of credit -- but six or more can make a much greater risk to future lenders.
Considerations
Credit card issuers can look at your credit report and notice a pattern of balances moving from one account to another. Issuers are well aware of the trick of hopping around zero percent teaser rates to avoid finance charges -- called "the balance transfer game." Do this too much, and companies may stop approving you cards with a teaser rate, or if too many people try this, it could move the credit industry to stop offering this perk all together.
Tip
Use balance transfers as a tool to pay down credit card debt, not a way to put off paying it. Avoid closing older credit card accounts after transferring a balance. Lenders and the credit bureaus like to see older accounts in good standing rather than several new accounts. Also, send in the minimum payment on the old account, because it can take up to four weeks to complete a balance transfer, so it is still possible to miss a payment during that time frame.
0 comments:
Post a Comment