Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.
Dear Credit Guy,
After receiving a new 0 percent interest rate credit card, I made a mistake and made a payment five days after the due date. Would it be wise to transfer my balance back to the original account since the new card raised my interest rate and will not lower the rate again? — Darlene
As you found out, the hard way, a great interest rate lasts only as long as your on-time payments. Once a payment is missed, the card issuer can and will raise your interest rate. Why? Because you didn’t fulfill your end of the bargain — paying by the due date — and the card agreement that you signed has a clause that allows the card issuer to raise your rate if you are late making even a single payment. This clause, I am willing to bet, was part of that fine print that no one ever reads when they receive the card.
Before we discuss whether you should transfer your balance again, I believe the first thing we should do is work out a way to ensure your payments will be on time. Several methods come to mind that I’d like to mention, and one hopes that one will work for you:
- Have the payment automatically deducted from your bank account at least five business days before the due date on your statement. This is by far the simplest and easiest thing you can do to ensure payments are made on time.
- Use a reminder on your BlackBerry or other personal device to alert you five days before the due date so that you can make an electronic payment. If paying by mail, set your reminder for 10 business days before the due date.
- Write on your personal calendar the day you need to make the payment online or mail it. Again, five business days before the due date for electronic and 10 business days for snail mail.
- If your due date falls on a day of the month that is difficult for you, request in writing from the card issuer that your due date be changed. You will have better luck getting the request approved by moving the date forward, rather than back. For example if your current due date is the 15th of the month, asking for a change to the 5th would be a better than to the 30th. When it comes to making payments, in the eyes of a creditor, sooner is always better than later.
- To avoid missing payments while on vacation or business trips, always check your upcoming bills and make any payments that will come due while you are away before you leave or set up an automatic deduction from your bank account. Every creditor I know of wants you to have a good time while you are on vacation, but they still want to be paid on time. Just because you are on vacation doesn’t mean they are.
Now that we have covered making those payments on time, every time, let’s move on to your question regarding transferring your balance again. Transferring your balance to a lower interest rate card might be a good idea. I don’t believe you will be sacrificing much in the way of a decrease in your credit score if you were to open another account and transfer your balance. Playing the “move the balance shell game” is not always the best thing to do, but in your case I say go for it. You might also consider closing the account from which you are transferring to avoid having access to too much credit.
Take care of your credit!
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