Archive for the ‘credit score’ Category

Should you do a Balance Transfer Right Now?

Friday, March 6th, 2009

Back just a few years ago, before credit card issuers began NOT wanting to issue credit, our mailboxes were full of balance transfer offers – some as low as zero percent.

Consumers intent on saving money on interest routinely jumped from one card to another. Who wouldn’t want to trade an interest rate in the double digits for one at zero, one or two percent? Those who kept careful records were able to move balances just prior to the end of the introductory rate period and thus avoid high interest altogether.

But guess what? When card issuers saw what those consumers were doing, the offers dried up. After all, when they were paying more for the funds than they were charging consumers, they were losing money on the gamble that they’d make plenty once the introductory periods expired. They didn’t want or need a customer who would leave them the minute the rate went up.

Worse, all that jumping around had a negative effect on credit scores. If you were a “card hopper” it might be hurting you now, as card issuers seek to cease lending to all but those at the top of the credit score chart. Your interest rates may have increased and your credit limits lowered.

But – you may still possess a variety of cards with differing rates – and one of your card issuers might offer a slightly lower rate for a balance transfer credit card. Thus it might be in your best interest to transfer balances from one to another.

Before you make that move, stop and consider your future plans, the actual cost of the transfer, and the impact on your credit score before you make any moves. If you aren’t planning on changing homes or buying a car in the next few years, then it’s probably safe to go ahead and work to save money. But if you’re going to need that credit before too long, you’re better off just doing all you can to pay down the cards with the high interest as fast as you can. Every transfer will affect your score.

First, along with your plans to buy a house or a car, you need to consider how and why you use that card now. Will you need to use it to charge purchases for any reason?

Under today’s rules, card issuers are allowed to put your higher interest transactions at the bottom of the list, so that low interest balances are paid first, and high interest balances continue to accrue interest.

That means, if you transfer a balance, you probably should NOT use that card for purchases. And remember, ANY late payment, even if it’s only a few hours late, will trigger an automatic increase in your interest rate.

Next look to see the balance transfer fee. Some charge 1%, some have a cap of $35 or $50 – be sure you know the fee before you request a transfer.

If you do ask for a transfer, be sure to keep on paying that other card until you either get a statement showing it’s been paid, or you go on line to verify a zero balance. The last thing you need in this economic climate is a late charge – and it’s accompanying damage to your credit score and your interest rates. Remember that being late on one card can trigger an increase on ALL of your cards. your resource for free credit report offers and the most current information regarding credit news. We also provide free tips and techniques to repair your credit for free. “Remember your credit report and credit score is more important than ever now.”