Refinancing Credit Cards

Factual Questions
1

Hi,

Now, I wasn’t particularly wise with my credit up until recently. I knew what to do, and I didn’t do it. As a result I have quite a bit of debt that I’m ready to shed because I hate paying interest and I really hate that nagging feeling that you owe somebody something. Now the amount isn’t particularly unmanageable (but substantial 5 digit USD) but unfortunately it’s all on credit cards (most under 14% fixed interest, so it’s not too terrible). I do not own a house, and really don’t have any savings/investments/property that would cover the debt in case I lose my job (yeah I’m a moron, but I’m young, I’m supposed to be a moron financially).

Now my credit is decent. It’s not too good since a lot of it is close to the limit and I had a lot of inquiries because I moved, but I’ve paid off a car before and I’ve never had a single late payment in my life. Now, I came up with a plan to pay it all off. I’ve already stopped using credit cards and I’m (hopefully) living barely within my means. However, I’d feel much better if I could transfer all my CC balances to a loan/line-of-credit, then I could a) Have a complete and utter emergency (death, injury, loss of job, etc.) credit float on my empty CCs b) I’m hoping it would be cheaper and easier to manage and quicker to pay off . Finding a cosigner for such a huge amount is out of the question. No house, no cosigner, how do I do it?

Now in theory it’s very profitable to a bank to extend such a line of credit to me, since they know I’ll pay (no missed/late payments on record) and they know I probably won’t pay it off at once, so they get a lot of interest with relatively low risk. Now, the problem is that they don’t know that I won’t run up all my CCs again once they are empty. And since they are all carrying a lot of balance it makes me a VERY HIGH RISK CUSTOMER.

Now, I don’t even know if there are lines of credit for people like me with no property. The consolidation loans I saw all had ridiculous interest rates (c’mon, what are you consolidating at 22% APR?). So a plan might be improving my credit by avoiding inquiries and reducing the balances like they are right now and then refinancing at a later date, but obviously I’d prefer to do it now.

So, my general questions:

a) Where do I go (my bank, online, etc.) to talk to a real banker that can make decisions about this situation?

b) Are there theoretically personal lines of credit for people like me that don’t have high interest rates?

c) What are next weeks lottery numbers?

Thank you and regards,

Groman

P.S. Now that I wrote this I got serious Deja Vu as if I wrote this before. With all the school and work I might’ve actually posted something similar before, got a few disappointing answers and now repressed them. So sorry in advance.

2

Aren’t there some credit card ads that allow you tro transfer the balance of an exiting credit card to their new credit card at a 0% interest rate?

(Of course, you have to be careful not to pay for ANYTHING else with that new credit card, because then your balance will not be entirely composed to transferred credit card debt and they can start charging you 14.9% for it.)

3

Yeah I can do that now, but then I’ll have more credit cards not less. Sure, I’ll have a lot less interest to worry about, but having 10-14 credit cards might be unmanagable. Closing any paid off card will seriously hurt my credit rating since I don’t have a mortgage(or any ongoing credit other than CCs).

4

You could check your current cards to see if you can get a balance transfer rate from one card to another or if you have a card that doesn’t have a balance you can transfer to get a lower rate. Sometimes you can get, like 2.99%. There are usually balance transfer fees, but you can decide if you’ll still save some $$ with the lower interest rate and the fee.

If you don’t feel like to talking to reps, some cards will let you balance transfer online. Usually there will be a section called “special offers”.

Yeah, I’ve been known to shift debt around a little bit…but I’ll add that usually it’s debt that will pay off, like my most recent debts related to the addition and renovation of my house on which I would make a sizable profit if I decided to sell it. I just had to say that, lest you think me an irresponsible credit-user. :dubious:

5

www.creditboards.com

Terrific website; very knowledgable and helpful people – just be sure to read all the newbie FAQs.

6

I’d never heard that closing out a paid-off credit card account impairs your credit rating.

But if that is indeed the case, then couldn’t you just cut the never-to-be-used-again credit cards in half and not close out the accounts?

7

Your credit history consists of accounts and other information, however, if you have a 10 year credit card, and you pay it off and close, in a few years after that it will disappear off your report. If it was your oldest card, your credit history just got shorter. It doesn’t matter that there isn’t 10 years of information there, it’s still showing the account as opened 10 years ago, which seems to be important.

The problem is that a balance transfers almost always pay off the last card on the list only partially, so you wind up with split balances - hard to manage.

8

tracer,

Regarding closing a paid card hurting your credit score… sometimes it will. Sometimes it won’t. If you have more than 5 live credit cards, it probably won’t, unless it:

  1. lowers the average age of your open accounts
  2. causes your % of used vs available credit to go over 30%, or worse yet 50%
    or
  3. Opal’s cousin, the Fair Isaac hampster, says so.

And in fact, your strategy of not using the card but leaving it open is a common one. Another variation on the same game is to use said card solely to charge items easily paid off on a monthly basis, say, clothes ONLY. Or maybe just one charge every 3 months. Sometimes cards get closed when ya’ don’t use 'em for long enough… sometimes not.

9

Closing out credit cards can hurt your credit score, particularly if they’re your oldest cards. But your credit score will rebound and if you aren’t planning to buy a home soon, you would probably be ok closing them.

The problem that you’re running into is that you’re trying to consolidate unsecured debt with more unsecured debt. Since there’s no collateral involved then banks have no reason to give you a better interest rate.

On Preview I see a couple of people have already answered the first part of my post… oh well