How To Make Money From 0% APR Balance Transfers
5) Things to watch out for: Even if things go smoothly and you get your money, here are some possible consequences to consider -
a. Your credit score will fall. Part of your credit score has to do with utilization, which is how much of your available credit you are actually using. Obviously, if you are borrowing everything you can get your hands on, the credit bureaus are going to see you as a higher risk of default.
Accordingly, do not borrow large amounts of money if you plan on applying for a mortgage or large car loan in the near future. Your credit score can drop anywhere from 10 to 100 points depending on how much you take out. Mine has dropped about 50 points to the high 600s, not necessarily high enough for the best mortgage interest rates.
b. Always pay the minimum balance. Even though your rate is 0%, that doesn’t mean you don’t have to pay the minimum balance shown on your statement. This can vary between credit card companies, but is usually around 1-3% of the balance. Leave enough money aside to pay this every month, as otherwise your rate will promptly be jacked sky high.
c. Beware of the Default Rate. Nowadays, it’s in your credit agreement that if you miss a payment with any credit card company, then all your credit card companies can charge you what is called the “Default Rate”. This can be up to 40%!! My advice is to put every credit card, even the ones you pay off every month, on auto-pay to pay off the minimum balance. That way you are sure to be current, and you can pay off the rest as you see fit. If you usually pay your bills on time, just keep it up and you’ll be fine.
Still interested? Well, I can’t stop you! This is not meant for anyone not already in good financial shape – if you are paying credit card interest already now, then there are probably better things to focus on. Yes, the credit card companies are hoping you will mess up. The nice mall you go to isn’t there because everyone goes straight to the sale rack. Every car salesman wants you to pay MSRP. But that doesn’t mean you have to!
Where can I find some great 0% APR offers? Check out my collection of the best 0% APR balance transfer offers with no fees. You can still get 0% interest for 12 months on both purchases and balance transfers with no fees! That’s free money!
By Jonathan Ping | Credit Cards | 2/20/05, 4:29pm