A zero percent balance transfer offer can be a used to the advantage of the consumer if handled properly. This is not what the credit card companies are hoping for. The zero percent balance transfer offer is intended to make it convenient for a consumer to consolidate their debt into one place. This does reduce the number of bills that are paid each month. The thing the credit card companies do not tell the consumer is that if the debt to credit limit ratio is above 30% with any one account, the credit score of that account holder will decrease.
The importance of this consolidation for the credit card company is that they will handle all of your debt and make all the profit from your need to have a revolving credit line. By placing all of one’s debt on one account and the debt to credit line ratio to be above 30%, there is a good chance the account holder will be viewed by other credit card companies as high risk and they will not solicit for that account holders business.
Each consumer’s credit rating is made up of many things. 30% of that rating is the credit line to debt ratio. Once this limit is exceeded, the credit rating of the account holder will drop. This is never explained in the offer but is true.
This can be avoided if the account holder is aware of this and only transfers up to 30% of the credit limit to any one account. Consolidation to a few accounts is considered financially responsible and has a favorable effect on the account holder’s credit rating.
Do what is in favor of when taking advantage of a zero percent balance transfer and not what is good for the credit card companies.
The harsh reality of our modern society is that the security of your family depends on how you handle your money. Don’t make the mistake of ignoring your personal finances — especially details about your credit cards. A full guide to using a balance transfers to consolidate balances and use other money-smart strategies.