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With
U.S.
credit card
debt at an all time high, many savvy consumers and
investors are renewing their commitments to rid
themselves of this burdensome and in most cases,
unnecessary debt. In doing so they are constantly
searching for the next best credit card with
higher credit limits,
lower annual percentage rates (APRs), and zero
balance transfer
offers. In fact switching credit cards
has become as common as changing the battery in
the fire alarm for some people and it has actually
worked. So if you are amongst the thousands of
Americans who are thinking of making a switch to
improve your financial picture, before you do
there are a few things that you should consider.
They include how multiple inquiries for credit
will affect your credit score
and if the APR
that applies to balance transfers
after the introductory
grace period
still makes it a good deal. In addition to these
two things you should also, as with everything you
do, conduct your own research to find the best
solution to meet your needs.
It
makes sound economical sense to switch credit
cards to save money in interest charges and fees.
Especially when you consider the fact that for
most credit cards the minimum monthly payment is
so low that it barely covers the interest charges
reducing your outstanding balance by just a few
measly dollars from month to month. Its no wonder
then that we jump at any new offer that comes our
way. When deciding whether to switch cards though,
you should keep in mind that every time you apply
for a new credit card an inquiry from that
particular creditor goes on to your credit file
whether you receive the credit or not.
Additionally, multiple inquires by different
creditors negatively impacts your credit score and
any account whether closed or unused remains on
your credit file for at least seven years. Last
thing, switching cards and closing accounts
immediately after the switch also impacts your
credit score.
When considering whether to take advantage of a 0%
balance transfer offer, you should consider the
amount of time that you’ll have before the
“normal” APR applies to that balance and whether
you’ll be able to pay that in full before the
grace period is over. Additionally, in the event
that you aren’t able to pay off the balance prior
to expiration of the grace period, you should
consider if the new APR that kicks in will be a
significant savings from the card that you are
considering transferring balances from and whether
interest will be charged on just the remaining
balance or the entire amount that you initially
transferred.
To
ensure that you are getting the best deal, you
should do a thorough search of available credit
cards before making a final decision on which
institution to submit a new application for credit
to. By doing so you will know upfront exactly what
you are getting and whether there are cost savings
to be realized, leaving very little room for
surprises.
Switching credit cards is a smart choice for
consumers who are trying to manage and conquer
their debt. For the disciplined person, this is a
very effective strategy to help you reduce your
debt load. If you find yourself in the situation
where you are presented with an opportunity to
switch credit cards, please keep in mind the
negative effect that multiple inquiries will have
on your credit score as well as the opening of new
accounts while simultaneously closing others. When
done wisely, after conducting a thorough search of
available options, switching credit cards can
definitely help you to achieve your financial
goals.
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