Playing the Balance Transfer Game

I came across some very interesting information in Liz Pullham Weston’s Money Talk section in this past Sunday’s Los Angeles Times. Money Talk is a column where people ask questions and Miss Weston attemps to provide them with answers to their problems.

This week somebody asked the following question…

Would it hurt our credit scores if my husband and I transfer credit card balances to interest-free cards? This would save us over $200 a month in interest. We’ve done this twice before but are concerned about hurting our scores.

I think this is a very relevant question in today’s market. A lot of people love to take advantage of those initial interest free balance transfer offers that you get when you open up a new card. These sound very enticing and save people a whole lot of money in interest. They seem like a fantastic idea.  So much so that I think a lot of people use them constantly and play a perputual game of moving balances around. This however, is not a good idea.

Even the person asking the question admits to having done it multiple times before.

This balance transfer game does have a negative effect on your credit score simply by the fact that your opening up a new account. That intial opening of a new account always creates a small negative influence on your overall credit score. To the same token closing a account also makes a small negative ding in your credit score.

The tricky part of playing this perpetual game, is that eventually these people are going to have the rug pulled out from under them. These balance transfer teaser rates are eventually going to go by the wayside. Credit card companies initiated this incentive during the boom years of credit and now are starting to reel back in many of the programs that were initiated then. You can already notice that these offers are getting less and less appealing.

So if your constantly balance transferring from one card to another, with the hopes of transferring it to yet another when that teaser rate expires. You are going to eventually find yourself with no where to turn. Then your stuck with a card that most likely has a higher interest rate than you had at the beggining. These teaser rates are just one of the juicy eye catching things card companies throw out there with high interest cards to distract the consumer, they do the same thing with rewards cards. Your most likely to find the lowest interest rate on a card with out all these frills.

So my advice would be if to examine the situation from all sides before you decided to take them up on one of these balance transfer offers. If your going to do it with the intention of paying off the balance completely before the teaser rate expires, then it would probably be a very good idea. However, if you’ve gotten used to playing this endless game of balance transfer musical chairs, I say be careful. If you think your getting one over on the credit card companies, trust me, your not. The ride was good while it lasted, but its ending is not going to be pretty.