A friend of mine tells me that one of his friends apparently never pays their credit card bill because every month she transfers the balance in full to another credit card and vice versa. Does this actually work?
At the very least I’m sure the credit company would hate your guts but is it actually against any laws or their terms? Either way it doesn’t seem like a very bright thing to do…
If there is a balance transfer fee, its not worth it because at even 2% of the balance transfered each time, annualized is at least 24%. 1% would be 12%.
If there was no fee than might be in the clear… but i wonder if CC companies treat BT’s the same way as purchases? That is if your balance is zero at the end of the grace period, you will not owe interest on the daily average amount?
Either way, it CAN work decently well if one constantly gets 0% APR offers for new credit cards (6 or 12 months typically), and there is no feel for this initial offer, and transfers it on a annual or semi-annual basis. Though at some point, I imagine you’d hit the limit of one’s credit limit.
Usually you get a grace period for balance transfers in terms of months, with no interest.
You’d need several though, and I can’t see anybody pulling it off for longer than a year or so.
The credit card companies are wise to “kiting”, and once you have six or eight, it’s going to reflect negatively on your credit report, therefore reducing your chance to keep getting new ones.
Regardless, the balance is yours, and you can’t keep it up forever.
It might buy some time in the short-term, however.
I’ve seen it done. Usually you only need to switch every 6 months or so, and eventually you stop getting 0% APR promos which makes it less worthwhile.
It helps to have good credit in the first place.
My girlfriend has been doing this for a while - changing to another 0% interest credit card whenever the current one is about to start charging again. It seems to be working okay (I think…) but she is running out of different cards to switch to.
I will tell you that as a former Customer Service supervisor at the credit card call center, that I have personally refused to allow a customer to do this and have set it up so that he could no longer transfer a balance to his card, transfer it away when it was due, and then transfer it back when the other card came due.
In my bank’s case, it was in the agreement that it was up to our discretion to allow/disallow a balance transfer.
It’s the same issue as the Martingale schemes for gambling. It may work for a short time, but when it fails it fails utterly and you’re ruined.