Can I keep using 0% APR, $0 fee balance transfer offers every 12 months to pay off my credit at 0% APR.?

Question

I have about $16,000 in credit card debt at 16% APR. I'm going to use a balance transfer with no fee to a card with 0% for 12 months. Can I just do a similar transfer every 12 months to a different card (with similar terms) to keep getting the 0% rate? Does this affect my credit score? Any pitfalls or fine print details I haven't considered?

Answer 1

Yes this is a very smart idea.

You can transfer every 12 months to a different card to keep getting the 0% rate with different companies (if another company offer it to you). However, most credit card companies will not let you transfer balances within the same company to another 0% card. So if your current 0% card is with capital one, if citigroup offer you a 0% credit card in 12 months, then you can transfer your balance to citigroup. However, Capital one will not let you transfer it to another capital one card.

It is a good idea to do this when your 12 months expire becaue the interest rate usually skyrocket. By continuously transferring the balance you will keep it at 0%.

If you do not charge any more money to your credit card, then you can pay down your debt faster since you are only paying on the principle on your 0% card.

Downsides are 1) if you are late one time with a payment, your interest rate skyrocket, 2) they usually charge a transfer fee to transfer to their card (i.e. $16,000 will be $16,100 after transferring) and 3) this only work if you never make a purchase on your 0% card. The reason why you should not make a purchase on the 0% card is because purchases are at a higher interest rate (not 0%) and all payments will be applied toward the finance charge of the purchases and very little will touch your 0% portion. And this defeats the purpose of having a 0% on the balance.

Your credit score will improve if you keep all previous credit cards open with a $0 balance. Why does this improve your credit score? Because credit scores uses the ratio of total balance to total credit limit. If your total credit card balance remain relatively the same at about $16,100 (with transfer fee) and you have 2 open credit card with a credit limit of $16,000 your ratio will decrease.

For instance with 1 credit card your ratio is $16,000 balance / $16,000 credit limit = 100% ratio. But now opening a credit card your ratio wlll be 16,100 balance / (16,000 + 16,000) limit = approximately 50% ratio. So you just decrease your ratio. This will improve your credit score.

Unlike what others have said, you lose very little to no points for opening a new credit card. You only lose points if you apply for too many credit cards in a 6 month window. This is called hard inquiries and too many hard inquiries in a short time period decreases your credit score.

Also, your credit score will improve faster because you will pay down the principle faster using 0% APR card.

Responsibility is the key. So if you qualify, keep transferring your credit card debt to the lowest APR card, try not to use credit cards any more, make all of your payments on time, and try to pay more then the minimum payment.

Answer 2

It is indeed possible, however the banks wouldn't offer it if they didn't make out 90% of the time. You must begin with a zero balance and you cannot charge anything more on the card, the way payments are applied is always to the lowest interest balance first (the zero percent) while you will pay 18%, or more each month on purchases. If you transfer and don't use the card, yes it will work...It takes extreme discipline. I got an offer for 2.99% until the balance is paid off...I transfered $20K into my savings account ( I earn 5.05% APR). I actually earn 2.06% on this transaction. If you read the fine print you will find that one late payment, or even a late payment that they pick up off your credit report ( which they pull regularly) will result in the interest jumping to the max.( around 26%). I'm always ready to pay off my balance next month if needed. I am very disciplined and watch my total indebtedness go down and my savings go up each month. Most people don't do this and just get further in debt.

Answer 3

Be sure to read all the fine print on that offer. Those special offers have more gottchas.

First, you may not get a credit line large enough for that $16K. You could end up with half on the new card and half on the old card. Now you have two large monthly minimum payments.

Second, the new card could require you to make a certain number of purchases each month at the regular interest rate -- more of the offers are going that route.

Answer 4

It probably will affect your credit score because you will either have too many open cards with available credit that you can all of a sudden use or it can show a record of too many closed cards.

Where are you going to find a card with a $16,000 limit when you already owe that much?

You also better read the fine print on the no fee card. I can't imagine a company loaning $16,000 with no return.

Answer 5

They say that transferring balances from one credit card to another (as long as it has a lower interest rate) is good for your credit in terms of paying it off but to keep doing that is maybe not to smart. If they were to ever look at your credit score they'll see and know that your constantly transferring debt to different cards every 12 months and then they write an opinion. You don't want to be seen as a risk or untrustworthy credit potential.

Answer 6

The last recommendation is to ever close the first credit card. It will hurt your credit score. Second, dont spend more than 30% of any balance which will start lowering the score too. Third is to read the fine print on your agreement. They say 0% interest but it may only be for a couple of months til they Spike the interest rates. I had 7% and paid way more than the minimum payment. Over 3 years they raised it to 25% and were trying to raise it to 30%. I had to close it and it hurt my score because it was my first credit card with the longest credit history

Answer 7

I did that for a year or so but eventually my debt became so high that they stopped offering such deals. Also the more cards you open, the less your credit score is going to be. I ended up having 10 credit cards and getting lost between them and sometimes missing the minimum payments.

You can do that for a while but don't get more than 5 credit cards.

Answer 8

Opening new credit will affect your score negatively. If you have to keep opening new cards to get the 0% into APR, then yes, your credit score will go down.

Answer 9

you will have 0% apr, but you will still have a payment schedule that you must meet. if you continue to do this, while not fixing your SPENDING PROBLEM, your balance will continue to rise, you will not be able to meet your minimum monthly payments, and then you will be in trouble. as for your credit score, every time you apply for a new card, your score goes down a little bit, and your score is affected by revolving balances.

Answer 10

In theory, the answer is yes...

In reality, people usually have very little self discipline, and will not change their spending habits... causing their debtload to grow, and allow them to get into deper credit card problems.

Pay off your credit cards, and stop using them for routine purchases. Use them only for EXTREME emergencies.