With U.S. credit card debt at an all time high, many savvy consumers
and investors are renewing their commitments to rid themselves of this
burdensome and in most cases, unnecessary debt. In doing so they are
constantly searching for the next best credit card with higher credit
limits, lower annual percentage rates (APRs), and zero balance
transfer offers. In fact switching credit cards has become as common
as changing the battery in the fire alarm for some people and it has
actually worked. So if you are amongst the thousands of Americans who
are thinking of making a switch to improve your financial picture,
before you do there are a few things that you should consider. They
include how multiple inquiries for credit will affect your credit
score and if the APR that applies to balance transfers after the
introductory grace period still makes it a good deal. In addition to
these two things you should also, as with everything you do, conduct
your own research to find the best solution to meet your needs.
It makes sound economical sense to switch credit cards to save money
in interest charges and fees. Especially when you consider the fact
that for most credit cards the minimum monthly payment is so low that
it barely covers the interest charges reducing your outstanding
balance by just a few measly dollars from month to month. Its no
wonder then that we jump at any new offer that comes our way. When
deciding whether to switch cards though, you should keep in mind that
every time you apply for a new credit card an inquiry from that
particular creditor goes on to your credit file whether you receive
the credit or not. Additionally, multiple inquires by different
creditors negatively impacts your credit score and any account whether
closed or unused remains on your credit file for at least seven years.
Last thing, switching cards and closing accounts immediately after the
switch also impacts your credit score.
When considering whether to take advantage of a 0% balance transfer
offer, you should consider the amount of time that you'll have before
the "normal" APR applies to that balance and whether you'll be able to
pay that in full before the grace period is over. Additionally, in the
event that you aren't able to pay off the balance prior to expiration
of the grace period, you should consider if the new APR that kicks in
will be a significant savings from the card that you are considering
transferring balances from and whether interest will be charged on
just the remaining balance or the entire amount that you initially
transferred.
To ensure that you are getting the best deal, you should do a thorough
search of available credit cards before making a final decision on
which institution to submit a new application for credit to. By doing
so you will know upfront exactly what you are getting and whether
there are cost savings to be realized, leaving very little room for
surprises.
Switching credit cards is a smart choice for consumers who are trying
to manage and conquer their debt. For the disciplined person, this is
a very effective strategy to help you reduce your debt load. If you
find yourself in the situation where you are presented with an
opportunity to switch credit cards, please keep in mind the negative
effect that multiple inquiries will have on your credit score as well
as the opening of new accounts while simultaneously closing others.
When done wisely, after conducting a thorough search of available
options, switching credit cards can definitely help you to achieve
your financial goals.
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