Cheeky credit card balance transfers could hurt later

By John Evans

Did you know that there is more than double the amount of credit cards today than there are people living in the UK? Last year there were over 145 million credit cards floating around and that figure is growing. Credit cards have become a major part of our financial life and there ain't a darn thing that we can do about. No credit crunch of any magnitude to going to change this. One of the major uses of credit cards, apart from purchases of course, has become for balance transfers. You may have transferred your balance in the past or perhaps you are considering the possibility in the future. Maybe you have even become a "card tart" - a serial balance transferor. However you have decided to play things, you need to be warned that changing credit cards over and over can and does have adverse effects.

If you aren't a card tart, but have tarting tendencies, then you need to know that the addiction develops along these lines. You have a card with a balance that has gotten a little out of hand. You are making your monthly repayments but are paying so much interest that you are hardly reducing the amount you owe at all. So what do you do? You jump to a card offering a 0% credit card balance transfer period. The length of this period varies from card to card but is now somewhere in the region of 10 months interest free. During these, say, ten months you pay off the balance as much as you can and then, not wanting to pay more interest, you leap to another card and so on.

The reason is that they have discovered a more direct approach to dealing with the small pockets of resistance: they simply don't give them a card. When you apply for a credit card the card company checks your credit rating with one of the credit referencing agencies. Your credit rating is a record of your relationship to credit companies and contains information on the cards you've applied for, the amount of credit given, how prompt you have been with repayments and so on. If the credit provider notices a tendency of card tarting on a regular basis they will decline your application because you simply don't make them enough money.

Now credit card companies are on the look out for card tarts in a similar way to police scouring the streets for people selling dodgy goods. They expose tarts by examining credit histories. Your credit history is what determines whether you are accepted for credit or not. It is held by a credit reference agency, which then discloses the details to the banks. The credit reference agencies simply compile data on credit use. On your credit file will be all of the cards to which you have applied, have been accepted for and the credit limits given. It also has details of repayments you have made - or failed to make.

Of importance here is the fact that the credit referencing agencies record cards that you apply for. If a bank notices that you have been changing cards over and over they may well decline your application. This is becoming more common. Of course, if you have an excellent credit history, not just of payment but of mature credit usage as well, then you will probably be accepted no matter what. Basically the trick is to use the card a bit as well as simply transferring your balance. In other words try and make it look as if you haven't just transferred for the interest free period - give the card company a little something back.

About the Author:

John Evans writes for various popular financial websites. He specialises on providing consumers with clear information on credit card matters. Find out more about compare credit card and the UK card here.