Be Wary of the Balance Transfer Game

There’s one common mistake that I commonly see people make when transfering balances among cards.  I’ve talked about balance transfer credit cards before and I’ve provided some information about offers with pretty incredible introductory offers on balance transfers.  At the same time, I have to caution you to be wary of the biggest mistake that most people make — bouncing your balances from one card to the next and chasing those 0% introductory rates around.

A balance transfer is always a good idea if you have a balance on a high interest card.  It’s easy to see how you can save a ton of money by paying 12% interest on a balance instead of 24%.  It’s a bad idea, however, if you’re really just looking for ways to ease the burden so that you might start spending again.  Transferring balances without a definitive plan to get that balance paid off in its entirety is asking for trouble, and is simply not a plan.

Furthermore, opening multiple credit card accounts in order to transfer your balance(s) will just end up hurting you by doing long term damage to your credit.  In turn, you might have difficulty getting a new loan, refinancing your home, borrowing money for college, ad infinitum. If you do qualify for that new credit application though, at the very least, you’ll have to pay much higher interest rates than a consumer with a comparably better credit score would have to pay.

Of course, the potential damage to your credit isn’t the only problem you face if you play the balance transfer game.  The worst part is the fact that you’ll never get yourself out of debt if you don’t stick to a plan to get that balance paid off in its entirety.  Solving the problem by opening new lines of credit is simply not a solution and will only serve to prolong the agony. 

So, the bottom line is that you should not look at a balance transfer as the solution to your financial problems.  Rather, a balance transfer should be looked upon as a financial reprieve that’s a small part of a larger plan to get those high interest balances paid off and out of your way.

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