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I’ve written quite a bit in the past about 0% balance transfer credit card offers and how to take advantage of them. All in all, I think these offers can be great tools for generating a bit of extra cash or helping you along in your debt repayment efforts, but they’re certainly not for everyone. In fact, a recent MSN/Money article provided a nice list of situations in which you probably shouldn’t play the 0% balance transfer game. Without further ado, here they are (along with some commentary from yours truly)…
“I already carry some credit card debt.” If you’re already carrying credit card debt, then you have bigger fish to fry and you should probably avoid playing. However, unlike the article, I think 0% balance transfers can still be useful… Indeed, if you can get approved, these offers can be a great way of consolidating high interest credit card debt. And since there’s no shortage of these offers, you’ll most likely be able to roll your debt from one 0% card to another until whenever a promo expires — before you know it, you’ll have the whole ball of wax paid off.
“I don’t have an emergency fund.” If you want to stay out of trouble, you’ll need to keep the principal on hand so you can pay off the balance when the promo period ends. If you don’t already have a stash of cash, you might want to avoid the temptation of having a giant balance transfer laying around in your bank account.
“I bounced a check or paid a late fee in the last year.” In short, these occurrences are a sign that you may not be sufficiently detail-oriented to profit from a balance transfer without slipping up and missing a payment, or failing to pay off the balance before the 0% period ends.
“I’ll soon be in the market for a major loan, like a mortgage or a car loan.” As you may or may not know, carrying high balances (especially if you’ve nearly maxed out your credit limits) can hurt your credit score. So if you’re looking to apply for a loan in the near future, you might want to shy away from large-scale credit card arbitrage.
“My credit isn’t that great, and the credit limits on my cards are low.” If you don’t have good credit, you might not qualify for the best offers (though it doesn’t necessarily hurt to try). Moreover, if you can’t get a large credit limit, then you’ll be limited in the amount you can earn, so it may not be worth the trouble.