Balance transfer cards’ 0 percent interest is alluring, but the limited time to pay off one’s debt is dangerous. For some, these cards can be addicting, shifting balances from one card to another to buy more time.
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I know this firsthand. In recent weeks, I’ve had a hard time resisting the pull of seemingly free credit myself.
After getting approved for a BankAmericard® credit card, I, in three short weeks, applied for another balance transfer credit card.
I knew I probably shouldn’t have applied for another credit card. As any personal finance expert will tell you, applying for multiple cards in a short period is usually a bad idea.
It can be a red flag to lenders and can cause your credit score to temporarily dip. (In my case, my credit score is holding up surprisingly well so far – but once the huge $7,000 balance I recently transferred to my BankAmericard is reflected in my credit reports, my credit score will almost certainly go down.)
See related:5 lessons from my first balance transfer card
The allure and dangers of balance transfer cards
Juggling a handful of interest-free promotional offers can also be treacherous – especially if you’re planning to use your new cards to add more debt to your balances, rather than pay off old charges.
Despite my reservations about adding another balance transfer card so soon after getting my first, I applied for the Amex EveryDay® Credit Card from American Express because the balance transfer fee is waived if I move the balance over within the first 60 days.
Although I hadn’t planned on applying for another credit card, I was intrigued by the possibilities that another fee-free balance transfer card offered. I still have until mid-July to transfer debt to my new BankAmericard without incurring any charges. And with the American Express card, I have until late July to transfer a balance for free.
I could transfer the $7,000 balance from my BankAmericard to the Everyday card, I reasoned, and that would allow me to transfer more of my husband’s charges to my BankAmericard if we needed to spread out our credit card payments even more than we already are. Bank of America is one of the only banks that will allow you to transfer someone else’s balance to your card.
I also liked the idea of having another line of interest-free credit I could use to make new purchases. American Express also gave me a much larger credit limit than Bank of America, so I would still have room to use my EveryDay card for groceries and other costs.
A few days after I was approved for the EveryDay card, I received an offer in the mail for another introductory period 0 percent APR credit card – this time with no foreign transaction fees! For a few seconds, at least, I considered applying for that card, too.
Life changes make 0 percent interest appealing
My husband’s contract as a postdoctoral researcher at a state university in California ends in August and, rather than continue in academia, he’s decided to switch careers.
He doesn’t yet have a job lined up and so the prospect of more free credit we could use to pay for necessities is tempting – especially since we’ll almost certainly have a harder time getting credit a few months from now if he still doesn’t have a job. Surely, he’ll have a job in another 12 to 15 months.
However, I also know full well that kind of thinking is a mistake – and is especially dangerous in a situation like ours because we really don’t know what the future holds. With a doctorate in physics, my husband’s job prospects are good, but the world is uncertain and it could take much longer than we anticipated for him to land on his feet.
If we keep racking up debt on interest-free cards, we could easily overdo it and stretch ourselves too thin. The last thing we need is to start our new lives with less income and more debt than we can afford.
How we’re carefully using our balance transfer cards
I decided to shred the most recent offer I received for a 0 percent APR credit card. However, I will transfer my BankAmericard balance to the American Express card.
We originally decided to transfer my husband’s $7,000 balance from his Chase Sapphire Reserve card to my BankAmericard because we wanted to free up cash for our end-of-summer move and spread out our bill payments.
My husband had also racked up an unusually big bill because of some one-time deposits, travel and living expenses and other unusual costs – all of which would have been tough to pay off at once.
Until this summer, we’ve always paid off all our credit card charges in full. But until we get some more certainty about how much income we’ll have coming in this fall, we’ve decided that we would be better off if we carefully spread out our payments and saved some extra cash.
We don’t have any other debt, so we can afford to be a little more liberal with how much we borrow.
My husband doesn’t have such a large balance this time around, but I may transfer another $2,000 or so to my BankAmericard before the card’s fee-free balance transfer offer ends. That way, we’ll be able to take a bit more time to pay off everything.
Our plan going forward is to spread out our payments over the next 15 months and only revolve our interest-free purchase balances if we’re certain we won’t be able to pay off our new purchases in full.
We’re grateful for the flexibility that interest-free credit cards have offered us and are glad that we built up strong enough credit scores to be able to apply for and get approved for such great deals – but we don’t want to push our luck.