Credit Repair Does Not Begin with Transferring Balances

[Apr 16, 2008.]

 

If you find that your current credit care statements are overwhelming, those balance transfer offers that you receive in the mail can become quite tempting. Their offers of lower interest rates as well as a chance to lower your monthly minimum fees can seem like a relief. However, there is more to the story than these seemingly miraculous offers. In the end, you still owe the money that you’ve spent, but you now owe it to someone else.

Transferring balances is akin to ‘robbing Peter to pay Paul.’

You’re simply moving your balances to other cards where they still need to be paid. True, you might be buying yourself some time (no pun intended) to make the necessary payments, but with balance transfer fees and limited time periods for those lower interest rates, you might end up with higher payments than you had before. Here are some of the problems with balance transfers:

• Higher interest rates after the initial period


• Sometimes you can not transfer an entire balance, leaving you with two smaller balances on two cards


• Different payment periods that can result in more bills to remember


• A different set of rules in terms of repayment

But what about those zero percent interest rate offers? Couldn’t those help you reduce your overall debt load? For some people, these offers can be a good deal. If you’re someone that will be able to pay the entire balance in the time period of the zero percent interest, then this will save you money. But if you’re not sure that you will be able to pay the balance or you’re just trying to avoid making a payment on that account, you might not want to accept that offer.

Another thing to consider with balance transfers is that each time you open a new account with a credit card company; this can lower your credit rating. This is due to the fact that it can look like you’re living beyond your means, living on credit instead of paying back these companies. The more accounts you have open, the lower your credit score can be, even though your true intention is to reduce your debt load.

In the end, if you can transfer small amounts to these offers and pay them off, they will be a good financial decision. But if you’re only using the transfers to avoid making a payment, you may want to consider debt consolidation through a service, rather than a complicated array of credit cards.

More Information:

• Ways to Avoid Paying Fees on Your Credit Cards
  The last things you need when you’re trying to rebuild your credit are more fees on your credit cards, adding to your already too-high balances. What you need to do is learn some basic tips on how to avoid these fees and only pay for what you’re bought in the first place.


• Creating Goals for Your Financial Success
  Going on a trip without a road map is the surest way to get lost, so why don’t we apply the same logic to our financial goals? When it comes to rebuilding your credit, you need to have some sort of plan in place to help you get to where you want to go in terms of your credit score and overall debt balance.


• Living Cheaply When You’re Rebuilding Your Credit
  The fact of the matter is that when you’re trying to rebuild your credit, you’re going to need to make some changes in your life. This will mean that you need to adjust your current spending habits in order to start paying down the debts that you have, as well as start looking for ways to live within your means for the rest of your life.


• How to Buy Gifts When You're Rebuilding Credit
  If you’re trying to pay down some debts, the prospect of giving someone else a gift becomes a stressful thought. You want to give gifts as you always have, but you also want to save your money in order to boost your credit score.