I’ve been reading around on the personal finance blogs out there and, I’m seeing more and more of balance transfers being referred to as a game. The truth is, these words “the balance transfer game” are some of the most dangerous words in the credit card industry today!
So, today, I’m going to talk about the process that’s often called the balance transfer game, why giving it that title is so dangerous, the dangers associated with transferring balances from one credit card to another for no other purpose than promotional interest rates and, at the end, I will give you a few resources to consider if you’d like to learn about the proper use of balance transfer credit cards.
What Exactly Are People Calling “The Balance Transfer Game”?
This term is often used to describe a process of gaming the system and paying no interest throughout the life of credit card debt. Already sound too good to be true? Good! Under the rules of this game, you wold apply for a balance transfer credit card that offered a 0% promotional interest rate, not worrying about the standard interest rate because you won’t have to pay it.
Before the promotional rate expires, you then find a new balance transfer credit card with a 0% promotion and transfer your debt to that card. The goal is to continue doing this until your debts are completely paid off.
Why Calling This Process A Game Is So Dangerous
Throughout our entire lives, we learn that games are fun. Most games have little to no consequences and this idea has been ingrained in us for a long time. Calling any financial process a game causes many to lose regard for important factors and only focus on winning the game.
But the truth is, the balance transfer game is one that is rarely won by people. Eventually, you will run out of offers to transfer your balance to or, the constant opening and closing of accounts could cause so much damage to your credit score that you eventually won’t be approved for that next offer.
The bottom line is, this process is not a game, if done improperly, it can send you spiraling towards financial hardship and bankruptcy!
Dangers Associated With The Balance Transfer Game
Your Credit Could Be Harmed – As you know, your credit score is probably the most important 3 digit number you will ever come across. There is one big factor at play when it comes to the balance transfer game and your credit score. The average age of your credit card accounts plays a role in the calculation of your credit score. Therefore, every time you open a new credit card, you reduce the average age of your accounts, possibly reducing your credit score.
You Can Open Yourself To More Debt – If you do get away with playing the game for a long time, chances are, you will have several open credit cards with tons of available credit. This is like bait on a hook. Whenever you have a weak point in good financial decision making because you really want something, you will be very tempted to put it on one of your several cards. Doing this often can be a spiraling path to bankruptcy.
Balance Transfer Credit Card Resources
Although balance transfer credit cards are not a good option for everyone, they are a great option for some. That being said, if you think that transferring a balance might benefit your financial stability, it’s important for you to take the time to learn more about the option before taking it. Here are a couple of resources I’ve recently written to help you do just that…
How To Use Balance Transfer Credit Cards – This is an article that will guide you through the proper uses for balance transfer credit cards. You know, when you want to make one transfer for the long run in an effort to improve your financial stability.
Balance Transfer Credit Cards (7 Step Guide) – This is not just one article. It’s a series of 7 articles that can help you understand what balance transfer credit cards are, who should consider them, how to compare for them, how to apply for them, how to transfer balances and how to keep your accounts in good standings through the entire process. Although it’s a long read, I’d strongly advise it for anyone considering balance transfers as an option to help them achieve financial stability.
Apply for a Personal Credit Loan – Rather than transfer cards, a personal loan may actually be a better option. Check out this great resource to help you head down this path (and avoid credit cards completely).
This article was written by Joshua Rodriguez, owner and founder of CNA Finance. Join the discussion with Joshua on Google+!