The Credit Card Shuffle.

Englishman

A few weeks back, I noticed that Virgin were offering a 0% interest rate for 6 months if you transferred the balances on your other credit cards to them. I decided to take the plunge and go for it. I moved over a few grand happy in the knowledge that I had "free" money for a 6 month period.

However, once I had done this, I then noticed that the interest rate on transferred balances was actually 2% more on their standard rate after the 6 month free period. Hmm, not so good.

Then I thought, well, I can aways transfer to another card offering me a similar deal and just shuffle the outstanding balance around, just making sure that I never had to pay any interest on what was owed.

However, I smell a trap here. For one thing, the cleared credit cards are sitting there just asking to be used on foreign travel!

I also can't really believe that I can just shuffle the money around will-nilly as the credit card companies appear to imply.

Any financial whizz-kids here who can advise me on this?

Englishman.

ball.

Yes, there is a catch. In the small print you agree your information can be stored on various databases to prevent fraud and other reasons, one reason is which all potential companies can assess you for statistics such as "loyalty". If you change your credit card every x number of months over x years, your loyalty rating will go down and companies will start refusing you new credit cards, but they will not tell you that is the reason why.

codeblue

I have switched credit cards for ones with lower interest rates.... At one time, in my past life, we had about a $3,000 credit card bill. It just seemed we always had a payment. We couldn't get out of that viscous cycle that was wasting our hard earned money. So, when we were offered a card with lower APR, we switched. It helped us to pay the card off way quicker and with less interest. Once it was paid off, we made a vow to never use the card unless it was paid off each month. That strategy worked and continues to work in my present life.

Codeblue

flower

The problem is the more credit you have the more you will use. Once you empty that credit card balance to another card eventually you will fill it up again (if you are anything like me anyway) and then youve got double the debt.

ball.

A credit card is a useful means of borrowing short term, provided you make it work for you, not against you. Properly used, a credit card can be a bonus source of interest free money. If you pay off the balance by the due date, you have up to 56 days free credit, money which can be earning interest for you in another account.

But if you actually need to borrow for longer than a few weeks, arrange for an overdraft facitlity with youre bank or building society (or US equivalent) because the worst interest rates by far are with credit cards.

If you really want to play the system have two credit cards, and make the payment dates 15 days apart. Each time you receive the statment for one particular card, start using THAT card straight away and stop using the other. This way you will gain the full 56 days free credit with each card.

Of course, one late payment will do away with all the benefit of interest earned this way. I suggest you only try this if you use Internet banking to pay them off and set the payment dates several working days before they are due to make sure they are paid on time.

I personally use a TESCO credit card which also pays me 1% back for everything spent on it at Tesco plus a further half a percent spent anywhere else. In a typical month, I have around 10 pounds to spend free of charge at Tescos plus around 500 pounds earning interest which I would not otherwise have, and it it always back to the zero balance by the due date.

Of course - this is how to use credit cards properly. The bottom line is - if you need to BORROW - DO NOT USE CREDIT CARDS - or you will simply be paying for the people like me who know how to use them.

xenawarrior

Also, be careful with these seemingly amazing offers- READ THE FINE PRINT. Many of them now have a "balance transfer fee" that is equal to up to 4% of the amount transferred so, depending on the amount transferred-you can end up paying either the same amount of interest or more as you would with the card you are transferring it from. Sometimes this % amount is in addition to a flat transfer fee of up to $50 per transaction. So if you are transferring $2,000 and there is a $50 fee plus 4% they add $130.00 to your balance right away and you are then being charged interest on their fees!!

The other thing to watch out for with these offers is to be sure to mail your payment EARLY- in plenty of time for it to be there days before it's actually due. There are provisions in most of these offers that if you are even one minute late- your entire balance is then thrown out of the promotion and into their normal percentage rates.

Another thing to be careful of- at least here in the states- the more credit you have the less you may able to get. If you want to obtain a mortgage for example, they'll look at your credit and if you have "accessible" credit lines out there, they may disqualify you because "if" you used it you'd be over their qualifying debt to income ratios even if you haven't used any of those credit lines in years. As long as they are "open" they will be considered as active.

The other thing is that the more times your credit file is accessed by potential lenders- it's another red flag when trying to obtain serious credit.

Lots to watch for but if you do it- these offers can be ways to pay down on debt accumulated with sometimes ZERO percent interest !!

Mulan

Don't EVER be late with a payment or you immediately are no longer interest free and the interest fee is big. That happened to a friend's son.

Valis

A few weeks back, I noticed that Virgin were offering a 0% interest

I hate it when they offer 0% interest..

Sincerely,

District Overbeer

xenawarrior

A few weeks back, I noticed that Virgin were offering a 0% interest

I hate it when they offer 0% interest..
Sincerely,
District Overbeer

I think this falls under the category of "earned interest"

Been there

One of the things to do when transferring like that is to close out the first account like someone above suggested.

Another option would be to call the present card company and tell them what it is you are going to do and see if they are willing to match or at least lower your interest on the card you have now. They want to keep your business. They also are sending out such promotions to people to get new ones and very well may do it to keep old ones. It may not be O% but could be much lower and cheaper in the long run with lower interest when the promotion is done. I have called several times to have my interest lowered.

The Credit Card Shuffle.

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