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I have been cautioned against taking a “line of credit” to pay off high interest credit card balances. Instead, I have been encouraged to keep using the 0% interest credit card offers for as long as it is offered at zero %. These cards are a dime of dozen these days.

As with anything in life, it is what you don’t know that hurts you. If I embark in doing the card hopping strategy, I don’t know what the long term consequences are in using these 0% offers. So, I kindly ask you the following questions:

1. Will it hurt my credit rating? Right now I have a very good credit score. I pay all my bills on time. It is the finance charges that are killing me.

2. Should I close the expiring 0% card as I open the new 0% card. At the end of 5 years I don’t want to have a trail of credit cards that are still open balance. Or should I?

4 Thoughts on What are the negative long term consequences of “card hopping” to pay off my high interest credit cards?
  1. Reply
    Paris P
    March 4, 2013 at 7:25 pm

    1. For the most part, no. As long as you don’t have upwards of ten cards or more (If it ends up that way, you may have issues), it won’t hurt your score as long as you keep making the payments on time. But something between 5-8 cards total with differing credit limits is average among U.S. consumers. Once you hit 8+ cards though, your available credit to income ratio (the amount of credit you have vs. your annual income) will start going too high, and your score will start to fall.

    2. It again depends… if you have somewhere between 5-8 cards total, then you should leave the cards open with small ($ 10-20) balances on them, or use them but only for small purchases you intend to pay off every month. Closing accounts negatively affects your score because it shows the credit bureaus that you’re not handling your debt properly. But, if you do have 8+ cards out there, then you would want to close your newest account firsts, because closing the oldest accounts hurts your score the most, so closing those new cards might be okay in the long run, if you have lots of cards. If you don’t have that many cards yet, then leave them open for now.

    The best strategy to use if you’re serious about paying it off is that when you do transfer the balance to a 0% offer card, take the card and put it in a desk drawer or safe deposit box. Then instead of making minimum payments as the bills come, add as much as you can afford to the bill. And since your card is locked in your desk, you won’t be tempted to buy with it. And then try and pay cash or only use a debit card straight out of your checking account so that you don’t rack up more debt unless it’s absolutely neccessary.

    Just make sure those payments are made ON TIME. Because no strategy will work if you make just one late payment since all your rates will rise to the delinquency APR, usually over 20%. On time is crucial.

  2. Reply
    Lord
    March 4, 2013 at 8:20 pm

    Hi,

    Check out http://creditcard.creditoverseer.info for some useful info and tips related to your query. Good luck!

  3. Reply
    Wylie Coyote
    March 4, 2013 at 8:40 pm

    You may not be able to pay and they can jump the interest rate in a default to very high rates.(29%). In order to maintain high credit rating, some banks prefer that you pay down your unsecured credit to 40% of the extended credit. If you can get 0% take that, but be sure to pay on time and in terms. Try to reduce the debt. You can start to build wealth that way.

  4. Reply
    logicboy
    March 4, 2013 at 8:43 pm

    The time you’re wasting bouncing the balances around you could have paid off the low balances first. Yes, most experts agree that it might be wiser to pay high interest off first, but Dave Ramsey says go for the psychological gains by paying off the lowest amounts first. Get a few victories under your belt, and watch how quick you get your credit cards paid off! Check out his book “Financial Freedom” and put his recommendations into his plan called “baby steps” this stuff is great. I picked up the book on ebay for $ 12.00 He has been Oprah and really drives home how to become debt free, I am not there, but I am not to far off! Good Luck kid!

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