The honeymoon is over, the 0% interest rate was good while it lasted and now the APR has kicked in on your credit card. Time to move to another 0% offer? Clever customers have been using the credit card offers for a while to reduce their interest payments to nothing and to pay off loans more quickly. By being smart a credit card customer can have the advantage of 0% credit for as long as they have an outstanding debt. But before you applaud this "beating the system" approach though, be warned: card jumping too frequently can seriously affect your credit rating, and the companies are wising up quickly to the practice.
Card jumping (as it's commonly referred to) is becoming a popular way of reducing interest payments to a minimum on outstanding credit card debt, but it can be detrimental to your credit rating. The misconception is that customers with large, interest-heavy debts on their cards are the most likely to have a poor credit rating. This is not necessarily true. Interest payments are the life-blood of lenders, so if their customers are paying on time and making interest payments, the lenders love them. Those who pay off their balance in full every month or make frequent credit card balance transfer jumps between cards are not profitable for the lenders. It may not seem fair, but what customers define as''good credit behaviour' and the lender's definition can be two very different things.
You can take much more control of your financial position by breaking through the mists of credit agencies and obtaining a copy of your credit report to see if card jumping has affected your rating. All three agencies in the UK will (for a small fee) send you a copy of your report so that you can see exactly what information is being held on you and, far more importantly, that it is accurate. The report will detail your financial history as well as other general information such as your address, occupation and income. If there's even one small mistake it can damage your chances of getting credit of any kind in the future. Frequent instances of card jumping could be one of the things that hold your finances back.
Many of the market leaders have more than one product on offer so multiple applications have a very good chance of being rejected. The lender isn't stupid - they will realise what someone who sends out multiple applications is trying to do. The chances are that person knows their credit rating may be poor and is probing the market, trying to find a lender that will let them slip through the net. A cluster of rejections on a credit history could send your credit rating through the floor, minimising any chance you had of cashing in on any 0% offers. This 'Black data' is added to your credit report for all the other lenders to see and you're left in the cold with no chance of transferring balances between tempting offers. How you run your financial affairs leaves a paper trail that can be easily followed by lenders back to a history that categorises you as a poor investment for the credit card companies. If you are going to transfer balances between cards, pick one that suits all your requirements and concentrate on that application, rather than attempting a scattergun approach.
If you are looking to transfer the balance of one card onto a 0% offer, the best policy is to look for a card that has a long 0% introductory period so that you are not attempting to transfer balances every six months or so. Short-term credit card balance transfers catch the eyes of the lenders and are signs of customer disloyalty, something lenders are loath to promote for obvious reasons. Some cards offer an introductory 0% period of up to 16 months. By moving your balance onto one of these cards you can stay with the same provider for a longer period of time, therefore drawing less attention to yourself by card-hopping too frequently and building up your reputation as a loyal customer. It also gives you a greater opportunity to pay off a larger amount of the balance at 0% interest. If you haven't paid off the debt completely by the time the offer runs out, the amount that you will be looking to transfer will at least be considerably reduced. Again, this gives you a greater chance of being accepted by the next card you choose to move to.
The 0% offers aren't there to encourage card jumping - they're designed to pull in new, long-term customers. By taking advantage of these offers you could considerably reduce your debt and avoid paying interest charges, but be warned. Doing it too often can draw the attention of the lenders and damage your credit rating. Use the offers wisely and you could improve your financial situation considerably.
Card jumping (as it's commonly referred to) is becoming a popular way of reducing interest payments to a minimum on outstanding credit card debt, but it can be detrimental to your credit rating. The misconception is that customers with large, interest-heavy debts on their cards are the most likely to have a poor credit rating. This is not necessarily true. Interest payments are the life-blood of lenders, so if their customers are paying on time and making interest payments, the lenders love them. Those who pay off their balance in full every month or make frequent credit card balance transfer jumps between cards are not profitable for the lenders. It may not seem fair, but what customers define as''good credit behaviour' and the lender's definition can be two very different things.
You can take much more control of your financial position by breaking through the mists of credit agencies and obtaining a copy of your credit report to see if card jumping has affected your rating. All three agencies in the UK will (for a small fee) send you a copy of your report so that you can see exactly what information is being held on you and, far more importantly, that it is accurate. The report will detail your financial history as well as other general information such as your address, occupation and income. If there's even one small mistake it can damage your chances of getting credit of any kind in the future. Frequent instances of card jumping could be one of the things that hold your finances back.
Many of the market leaders have more than one product on offer so multiple applications have a very good chance of being rejected. The lender isn't stupid - they will realise what someone who sends out multiple applications is trying to do. The chances are that person knows their credit rating may be poor and is probing the market, trying to find a lender that will let them slip through the net. A cluster of rejections on a credit history could send your credit rating through the floor, minimising any chance you had of cashing in on any 0% offers. This 'Black data' is added to your credit report for all the other lenders to see and you're left in the cold with no chance of transferring balances between tempting offers. How you run your financial affairs leaves a paper trail that can be easily followed by lenders back to a history that categorises you as a poor investment for the credit card companies. If you are going to transfer balances between cards, pick one that suits all your requirements and concentrate on that application, rather than attempting a scattergun approach.
If you are looking to transfer the balance of one card onto a 0% offer, the best policy is to look for a card that has a long 0% introductory period so that you are not attempting to transfer balances every six months or so. Short-term credit card balance transfers catch the eyes of the lenders and are signs of customer disloyalty, something lenders are loath to promote for obvious reasons. Some cards offer an introductory 0% period of up to 16 months. By moving your balance onto one of these cards you can stay with the same provider for a longer period of time, therefore drawing less attention to yourself by card-hopping too frequently and building up your reputation as a loyal customer. It also gives you a greater opportunity to pay off a larger amount of the balance at 0% interest. If you haven't paid off the debt completely by the time the offer runs out, the amount that you will be looking to transfer will at least be considerably reduced. Again, this gives you a greater chance of being accepted by the next card you choose to move to.
The 0% offers aren't there to encourage card jumping - they're designed to pull in new, long-term customers. By taking advantage of these offers you could considerably reduce your debt and avoid paying interest charges, but be warned. Doing it too often can draw the attention of the lenders and damage your credit rating. Use the offers wisely and you could improve your financial situation considerably.
About the Author:
As a financial writer Paul Dury enjoys breaking down the jargon and provide consumers with a clear view of the financial options available. If you would like to learn more about a credit card balance transfer you can read more here.
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