Many people who are in debt like to take advantage of the low interest rates offered by new credit cards. In theory this is a great idea. From a mathematical perspective, it makes perfect sense.
But from the pont of view of the credit card companies, it’s not always such a great idea.
When you apply for and are rejected for new cards, you create inquiries on your credit report, which result in lowering your overall score. This, in combination with your debt-to-income ratio, makes you stand out as a credit risk to potential lenders. You also may be pushing yourself off a cliff unknowingly. If you lower your score sufficiently, your exiting cards may notice and reset your already unattractive rates to what is called the penalty rate. Even if you don’t miss a payment, a change in risk profile (that is, your credit score) can cause a universal default provision to be applied, resulting in a 30-percent-or-so interest rate!
While all of that is true, I will continue to hammer home this mantra: shifting around your balances is a nice, temporary solution, but to solve your debt problem in the long run, you have to change your spending habits.
_________________________________________
If you are looking to get out of credit card debt, you should subscribe to my newsletter. I paid off over $50,000 in credit card debt in exactly one year. I’m now debt free. In my newsletter, you can learn how to pay off your credit card debt too.
Sign up today and I’ll send you the special report everyone is talking about: 15 Secrets The Credit Card Companies Don’t Want You to Know. You’ll also get tips about how to pay off your debt, how to save money, and how to make more money.
Just provide your name and email address below:
_________________________________________
Technorati Tags:
credit card debt, consumer debt, eliminate debt, pay off credit card
