Thread: BT question...

Hmmm... I'm not sure why it would damage your credit if you are denied the balance transfer? As long as you make the minimum payment anyway while the BT is being processed, you should be fine. I'd be really surprised if they denied it anyway - there is a reason they want you to transfer the balance

A balance transfer request may initiate a credit report request, which in turn may lower your credit score. I'm not sure. I wouldn't worry too much about that, but there are two things you might consider.

First, if you haven't already, you should call your lender and speak to a representative. Tell them that you would like to freeze your credit limit at its current value, and you do not wish it to automatically increase anymore. If your card is subjected to CCA2009, then they HAVE TO do what you ask. If it is not, they DON'T HAVE TO, but they probably don't train people on two types of business practices (one pre-CCA2009 and one post-CCA2009), so they are likely to do what you ask.

Second, if you are constantly getting limit increases because your balance starts to push the limit, then that means that you are putting way more than the historically recommended 20% utilization on your credit cards, and that the TRUE solution to your problem will be in revisiting that particular practice. We've had some discussions on that matter already, and I invite you to follow up in the "management" section of this forum.

When it comes to balance transfers specifically, I've never had a lot of personal experience, but I have known many people that played the balance transfer game for years. About half of them never made a mistake, the other half got in over their heads. All of them stopped doing it once they got older and didn't want to be bothered with the hassle anymore. In the end, it looked like a massive headache and a big gamble.

An alternative would be to see about taking out a general loan from a retirement plan, like your 401k, and use the lump sum to reduce your credit card balance. This ONLY works if you do it in conjunction of a complete and uncompromising credit card freeze. My wife and I took out a 401k loan to pay off credit debt a few years ago, and we keep using the cards. Now we have an amortized loan through my old 401k, which I am not allowed to rollover at the risk of penalty, until it is paid off, AND we racked up all the money on our credit cards. So, now we are just double deep from before we started.

Again, the real solution is going to be in the monthly budget. I would advise you to NOT take out any new cards and NOT make any changes to your existing accounts until you have thoroughly documented your spending and made a budget plan. Only then can you look at the numbers and come to a true understanding of the best course of action.

Patrick

One other thing to look at would be a cost-savings analysis. Balance Transfers always have an associated fee, though I forget the range, 3% sounds familiar. This fee is immediate and applied to the entire balance. So you have to consider that your transferred balance may have an intro rate of 2% for 12 months, but including the transfer fee of 3%, you are looking at 5% for the year. If your BT intro rate is for less than a year, your effective cost of credit goes up even more. Say it is for 6 months only, then you are paying 5% for 6 months then whatever the normal rate is (say 12%) plus the 3% transfer fee for the remaining 6 months.

I'd recommend doing the math to make sure you will actually save enough to make it worth while.