Things You Must Know Before Consolidating Credit Card Debt
Thursday, July 5th, 2007 Subscribe To Our Feed
Banks have also begun to track “switchers.” individuals who move balances from one “teaser” rate to another “teaser” rate. This is a very costly and unprofitable segment. One of the initiatives developed by credit card companies to combat this behavior is to charge a fee for balance transfers to low introductory rate cards. Obtaining cash upfront offsets some of the cost of lending money at below market rates. This behavior could reduce your ability to get credit cards in the future. Also, if you are transferring from one teaser rate to another low interest rate each year, your credit score could be negatively impacted since one of the factors in a credit score is the number of credit reports requested.
So, if you do decide to consolidate your credit cards, I would suggest using two cards. One card which will have a very low or 0% interest rate and a second card used only for current purchases. But make sure you pay the entire bill of the second card each month.
Advantages
If you can get lower interest rate - “teaser”
1 check to write
Less chance of late fee
Closing credit card accounts could help you credit score
Disadvantages
Can’t use that card for new purchases..typically higher interest rate More companies charging Balance Transfer Fees - began in 2001 Banks check to minimize your chance of transferring to another “teaser rate”
Will try hard to sell you other products like payment protection.
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