Credit Card Rewards for Business

Posted on October 7, 2010 by Credit Cards With Rewards

Photo of business people at a meetingMost businesses, large and small, can benefit from opening credit card accounts for their staff. The biggest benefit is for accounting, because by making purchases through plastic, it’s easy to track expenditure against your monthly statement: no more petty cash to worry about!

But just like a personal credit card, business cards often reward their owners in various ways too.

For example, if you or your staff travel regularly for meetings, training, or other business reasons, consider getting a card that specializes in executive travel. Such credit cards will usually offer a tailor made travel insurance package that’s right for business, along with other perks, like access to executive lounges in airports, deals on car hire, and, of course, travel miles.

Cash back credit cards are also popular for businesses, but choose one that makes sense. Remember, the value of cash back rewards will vary depending on what you buy with them. With a personal credit card, for example, you may get 5% cash back for groceries, and only 1% for other categories. A business credit card, on the other hand, will more likely be used for different types of purchases (travel expenses, office equipment, and so on). Make sure that the card you choose rewards categories that you’ll actually use!

When you’re considering a business credit card, find out if the issuer offers an online shopping mall, or partners with other suppliers that may benefit you. If the goods being offered are of interest to your business (especially regular purchases, like stationery), you could benefit from both convenience and significant discounts!

Most of the precautions you would take when choosing a personal credit card will equally apply to a business card, for example:

  • Are there annual fees, and are they worth paying? Sometimes they are, if other factors are favorable.
  • If there’s an introductory interest rate (say, 0% APR for the first 6 months), find out the terms attached to that rate. Does it only apply to balance transfers, or new purchases also?
  • What are the normal credit card terms, particularly APR, once any introductory offers have passed?

Other, business specific factors may also be worth investigating. Especially interesting is the option to get additional cards for your staff, particularly with no annual fee. Make sure you can set spending limits on each card according to your company’s needs.

In summary, most businesses work more efficiently with the right credit cards. Just make sure to ask yourself what benefit any prospective card will bring to the table. A wonderful personal credit card may not be such a good fit for business, but so long as you’re aware of that fact, you’re sure to choose an option that will work well for you and your company!

Image Credit: iStockPhoto

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0% APR Credit Cards Savings

Posted on September 22, 2010 by Credit Cards With Rewards

Photo of a savings jarOne of the most common reasons you might consider transferring your existing credit card balance to a new card might be to take advantage of introductory interest rates.

It’s not unusual for competing card issuers to tempt you with 0% APR on balance transfers for 6 months, and sometimes even up to 18 months! If you’re determined to get rid of old credit card debt once and for all, this can be a wonderful opportunity to clear your balance at a much lower cost.

There are a few things to watch out for, however:

  • New purchases may still be charged at the standard APR, and may continue to accrue interest until the original balance transfer amount has been paid off in full.
  • When the introductory rate is over, will you be paying a higher interest rate than you’re currently paying? Don’t be tempted by short term gains if the long term cost is too great.
  • Is there a balance transfer fee, or any other fees in excess of what your current card charges? Make sure they don’t cancel out any savings you might make.

Before you take the first 0% APR offer you get, think about why you’d want to take advantage of such an offer. The best reason is to give yourself a better opportunity to clear the high-interest debt on your current credit card, and before you submit your application, make sure you’re committed to taking this task seriously. Until you have your debt under control, ask yourself if you can be disciplined enough to avoid making new purchases on your new credit card.

Taking the plunge

If you’ve weighed up the options, and decided to take advantage of a 0% APR balance transfer to another credit card, are there really significant savings available? To answer that, let’s look at an example:

  • Assume you transfer $1,000 to a new credit card that offers a 0% APR introductory rate for 6 months, after which it goes up to 15% (the same rate as your old card in this example).
  • Pay off $100 per month, and make no new purchases.
  • For simplicity, there are no transfer fees involved.

The table below shows the difference between your new card and your old:

Balance (new card) Payments 0% APR 15% APR
1,000.00 0.00 0.00 0.00
900.00 100.00 0.00 12.06
800.00 100.00 0.00 10.88
700.00 100.00 0.00 9.68
600.00 100.00 0.00 8.47
500.00 100.00 0.00 7.25
400.00 100.00 0.00 6.01
304.02 100.00 4.02 4.75
206.75 100.00 2.73 3.47
108.18 100.00 1.43 2.18
8.29 100.00 0.11 0.87
0.00 8.29 0.00 0.00
TOTALS: 1008.29 8.29 65.61

As you can see, after 11 months, your balance has been completely cleared, but with your old card, it would have cost you 8 times more in interest! If there were transfer fees involved, and if they amounted to less than $57 (or 5.7% of the transfer amount), then you would have still made a saving.

Of course, this example just shows one simple case, and depending on other factors (monthly repayment amounts, length of introductory rate, fees, etc), your mileage may vary. However, it does illustrate that credit card balance transfers with a 0% APR introductory rate can help you clear your debt faster!

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Applying for a Credit Card Online

Posted on September 21, 2010 by Credit Cards With Rewards

Close up of hand typing on a computer keyboardIt’s amazing that within a few short years, we’ve come to depend on the internet for everything from getting the latest news, to booking our flights. But did you know that many of the major credit card issuers will also let you complete a credit card application online too?

This is a major convenience, and so this article looks at what’s involved, and what to look out for.

Security

The biggest concern most people have with entering personal information on a website is security. This is especially true for credit card application forms, because so much of the information you give can be used for criminal purposes, should it fall into the wrong hands.

Thankfully, credit card providers are aware of this, and all of them ask you to fill out information on a secure website. It is virtually impossible for hackers to access your personal details through sites like these.

In reality, the real security check comes from ‘phishing’ attacks. This involves criminals setting up fake websites that look just like reputable ones, and where unsuspecting customers enter sensitive information. It’s difficult to tell from a casual glance whether a site is fake or not, so before you enter any information, check the following items:

  • Does the website address begin with ‘https://’ rather than the usual ‘http://’? If so, that’s a good sign, because the extra ‘s’ stands for security. Many web browsers will also say what organization is certifying the secure connection, so as an added precaution, do a search for information about them, to make sure they’re reputable (e.g. Verisign, Thawte, etc).
  • Is the website address spelled correctly? Many fraudulent sites simply register similar names to reputable websites. For example, a misspelling of this website’s address could be creditcardswith-rewards.com (hyphen in the wrong place). Other tricks include using plurals, adding extra letters, substituting a letter with a similar looking one, etc.
  • How did you get to the application form? If you clicked on link in an unsolicited email, or found it on a little-known website, check your sources carefully.

If in doubt, use one of the major search engines to look for the main company website, then just use links available within that site to navigate to the application form.

What information you’ll need

Every application form will ask for personal information, and this will vary from country to country. Generally, they will ask for basic details (name, address, date of birth, phone, etc). This is obvious enough, as they’ll need to be able to contact you, and know that you have a physical address. A social security number will also be required to perform a background check.

Other personal identification will often be asked for (e.g. driver’s license number) as an added verification measure. Furthermore, they will likely ask for your total household income, and will use this information in conjunction with credit checks to ensure you can afford to take on more debt.

You will probably be asked for some personal information, such as your mother’s maiden name, which is simply used as a security question, should you ever have to verify your identity by phone. Different cards may add some other requests, but it’s usually just to make the application process more efficient.

After you submit…

Most of the information you’ll be asked for is sensible enough, and once you submit your application, you’ll normally have to wait for a decision. Some card providers do give instant approval, but generally, you’ll receive a decision in writing within two weeks. If you’ve got an excellent credit rating, you’ll usually get a quicker decision.

In general, there’s nothing sinister or underhand about online credit card application forms. Any reputable provider will provide a link from the application form to a page outlining their policies, and you should read through this document carefully. Make sure your personal information is only being used for purposes you’re comfortable with (i.e. not being sent to marketing departments), and you’ll find that applying for a credit card online is the only way to go!

Image Credit: stock.xchng

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Introduction to Cash Reward Credit Cards

Posted on September 13, 2010 by Credit Cards With Rewards

Picture of cash (US coins) to illustrate cash reward credit cardsOne type of reward credit card that always proves popular is the cash reward credit card. Instead of earning points, miles, or any other abstract benefit, you simply receive cash!

Another article on this site looked at the point at which credit card rewards become uneconomical. For clarity, some details were omitted, including just how credit card providers pay for these cash rebates. Of course, when people don’t pay off their balance in full each month, the credit card companies make their profit soon enough. But what happens when financial habits change suddenly, and people start clearing their debt earlier? This would undoubtedly eat into their profits, and may become unsustainable.

But there’s a missing piece of the puzzle, namely the merchant. While everyone is aware that they have to pay interest on their credit card purchases (with the exception of some introductory rates), what’s often overlooked is that when you pay for something by credit card, the store you buy from also has to pay a commission to the credit card company!

And that’s where the cash back comes from. Instead of risking a potential loss with their rewards system, the credit card provider simply shares a portion of the merchant’s commission with you. When you don’t clear your balance each month, they still make money by charging you interest.

Although it really seems like a win-win situation for the card issuer, you can still make it work for you too, by paying off your balance in full each month.

Things to watch out for with a new credit card

Credit card providers will offer a lot of great deals to entice you into switching over to their card. As always, don’t be too tempted by initial offers, because they usually run out after a few months. Instead, look past the introductory rates and make sure your card offers real long term value.

With cash back credit cards, check out what purchases qualify for rebates, and how much you get back for each one. Normally, certain purchases (groceries, gas, etc) will offer one rate, while others will give you a lower rate. While this can make it difficult to estimate how much you’re due back, you’ll find that most cards operate this way.

It is also worth being aware of how and when you’ll receive your cash back. Often, you’ll get a check at the end of each year, or a credit against your account. Some rebate cards may give monthly rebates, but annual is more usual.

Finally, your credit card provider may have some special deals with selected merchants. If you normally make a lot of purchases from these vendors, you may get even better rebates for these. Just make sure their selected partners are ones you would definitely use!

Image Credit: iStockPhoto

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Introduction to Frequent Flyer Credit Cards

Posted on September 10, 2010 by Credit Cards With Rewards

Airplane in flightTravelling is undoubtedly one market that has embraced the concept of credit cards. From booking flights online, to avoiding the hassle of foreign exchange and traveler’s checks, credit cards are a major convenience in today’s global village.

Another business model that has been with us for over 30 years is the frequent-flyer program. In essence, people who travel extensively with a particular airline, accumulate ‘miles’ or points that, in time, can be exchanged for free flights and other expenses.

Over the years, as both markets have grown, many partnerships have emerged that have the potential to give customers some great deals. The frequent flyer credit card is one such partnership, and is worth considering if you to a lot of travelling.

Not just for flights

Despite the name (and even that isn’t universally used any more), frequent flyer credit cards are usually more flexible than you might think. Although some cards may have only awarded you air miles when used to purchase flights from their airline partner, nowadays it’s more common to receive miles for any purchase.

And the reverse is true too. You no longer have to redeem your miles against air fares with a specific airline. Usually, can also use them against other (usually travel related) purchases, such as hotel rooms and car hire, and your provider will often waive foreign transaction fees too.

Travel insurance has also become a standard feature of these credit cards, but the specifics can vary greatly. Make sure you check the details before you fly, to ensure you’re happy with the level of cover provided. Choosing a major global brand is often a great idea too, because their local branch can often provide replacement cards if your wallet is stolen, and sometimes even give you emergency cash.

Things to watch out for:

As with any credit card, make sure the rewards you’re getting aren’t outweighed by interest rates and fees. What might look like a generous travel offer could be charging an above-average APR, or excessive annual fees. These details are readily available, however, so as long as you check their literature carefully, you shouldn’t get caught out.

Another thing to look out for would be restrictions on how and when you can redeem your miles. Ask your provider if you can use them at peak times, and if there are any blackout dates. Some cards restrict you to choosing from a small number of partners, while some of the better cards allow you to redeem miles against all leading airlines. Depending on your usual travel arrangements, this may or may not be a problem for you.

And finally, ensure that your points earned don’t have an expiry date. There’s an easy way to find out: if they don’t expire, you can be sure that the credit card provider will be boasting about it!

So if you’re a frequent traveler, a credit card that rewards the distance you travel may be just the ticket to save you some real money. But don’t stop with the benefits listed here: shop around and make sure you’re getting the best deal you can. Happy travelling!

Image Credit: Wikimedia

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Why do Credit Cards Offer Rewards?

Posted on September 7, 2010 by Credit Cards With Rewards

Photo of reward credit cardsYou could argue that having a little piece of plastic that lets you buy things easily and securely in seconds would be something worth paying for, right? Forget about carrying cash everywhere, or waiting days or weeks for a loan application to come through, because this little gizmo will fund your lifestyle right now! Nowadays, we’ve all bought into the convenience and safety of having a credit card, so why would any provider offer even more rewards?

Here are 3 reasons why rewards have become so competitive among providers:

Image Credit: stock.xchng

1. To keep you as a customer.

The average credit card APR as of this writing weighs in at around 14.9%. That’s a big chunk of profit for the providers, and they want to keep you using their cards for as long as possible. If a small cashback reward will convince you to buy something that you were a little undecided about, then it’s a great investment for them.

In theory, the credit card providers are taking a risk. After all, if you pay off your balance in full each month, you get the full benefit of the rewards, and none of the high interest charges. But the fact is that there are enough people out there that don’t clear their balance for long periods of time, and that’s when credit card rewards pay back the providers in spades.

2. To keep their business partners happy.

Imagine you were in charge of running a chain of hotels in a stormy economy. You would undoubtedly want to try any means at your disposal to keep occupancy rates as high as possible, and this is always going to involve some kind of investment. Traditionally, this involved paying for advertising, but increasingly, it has evolved into forging relationships with other businesses, including credit card providers.

This works both ways: if your hotel chain promises to reduce its rates if the booking is paid for with a particular brand of credit card, then the card provider can offer great rewards to its customers, without having to bear the full cost of them. In return, the hotel opens up a whole new lucrative sales channel.

This works out great for both companies for as long as bookings keep coming in. Once they start to dry up, the credit card partners are more likely to be dropped in favor of a competing bank, putting the original provider at a disadvantage. These kind of rewards are especially valuable to card providers, and it’s not something they want to give away lightly.

3. To keep you away from their competitors.

When you’ve got ongoing customers in any business, especially ones that are paying large sums of money, you’ll do anything to hang on to them. Credit card providers are no different, and use rewards to remind you that they value your business, and also to encourage you to keep spending.

They also use rewards to entice you away from their competitors. Even though you’ll see offers of 0% APR balance transfers for 6, 12, even 18 months, you can be sure that the long term profit after these introductory rates are finished will more than make up for the offer.

So there you have 3 reasons why rewards are offered, but there may be many more. If you’ve any other ideas, we’d love to hear about them in the comments below.

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When Do Credit Cards With Rewards Really Benefit You?

Posted on September 2, 2010 by Credit Cards With Rewards

Illustration showing the point where credit card interest outweighs credit card rewardsMany credit cards offer rewards of some description these days. Putting a value on these rewards can be difficult, and different people will get more or less benefit from the same piece of plastic, depending on their lifestyle. For example, if you do a lot of travelling, getting air miles and travel insurance will be more helpful for you than someone who doesn’t venture far out of their locality.

Other credit card providers may offer you cash back rewards, or discounts on certain purchases, and while many of them sound tempting, you may begin to wonder: what’s in it for them? I think we all accept that credit card providers are trying to make a profit, and there’s nothing wrong with that, but at the same time, it’s worth taking a little time to get to know how beneficial the rewards actually are, and what steps you can take to make the most of them.

APR

When comparing different credit cards, the figure you want to look at first is APR. This is basically a standardized way of comparing interest rates and fees over the course of a year, and while it’s not perfect, it’s a reasonable baseline for making comparisons. As of this writing, the average APR for credit cards is a little under 15%, which means that the credit you use on your card will cost you 15% of its value over a year.

Except, it doesn’t. What APR doesn’t take into account is compound interest. In other words, if you make purchases of $100, then after one month, you’ll be charged 15% interest divided by 12 months, or approximately 1.25%. That makes your new balance $101.25, and if no repayments are made, your new interest will be calculated on this figure, NOT the original $100. When you work it out, 15% APR actually costs you a little over 16%, and this figure is called the Annual Percentage Yield, or APY.

Comparing Reward Credit Card Payments

So what does APR and APY have to do with credit cards with rewards? Well, it’s all about give and take: the credit card provider will give your rewards, but it will take back in the form of interest and fees. The best case scenario is if you have a reward card with no annual fees, and you clear your balance every month. In this case, you get the benefits of cash back, air miles, or whatever other rewards are available, but it doesn’t really cost you anything to get them.

Of course, many people don’t pay off their debt in full every month, so let’s suppose you have a card that gives you 5% cashback on purchases. Sounds tempting, right? So in January, you make one purchase of $200, and you decide to pay off 10% of your balance each month. Here’s how that works out:

Balance Repayments Repayments to date Interest Interest to date Reward Benefit
Start 200.00 0.00 0.00 0.00 0.00 10.00
Jan 182.41 20.00 20.00 2.41 2.41 7.59
Feb 166.37 18.24 38.24 2.20 4.61 5.39
Mar 151.74 16.64 54.88 2.01 6.62 3.38
Apr 138.39 15.17 70.05 1.83 8.45 1.55
May 126.22 13.84 83.89 1.67 10.11 -0.11
Jun 115.12 12.62 96.51 1.52 11.64 -1.64
Jul 105.00 11.51 108.03 1.39 13.02 -3.02
Aug 95.76 10.50 118.53 1.27 14.29 -4.29
Sep 87.34 9.58 128.10 1.15 15.44 -5.44
Oct 79.66 8.73 136.84 1.05 16.50 -6.50
Nov 72.66 7.97 144.80 0.96 17.46 -7.46
Dec 66.27 7.27 152.07 0.88 18.33 -8.33

When you start out, your “reward benefit” is $10, but as interest builds up, it starts to eat into that amount, until eventually, they credit card provider starts to make its money back.

For the first 5 months, you are still getting the benefit of the rewards, but after that, things go in the providers favor. After a year, the rewards have been used up, the credit card provider has made about 4% profit ($8.33 on the original $200), and you still have about a third ($66.27) of the original amount left to pay back!

Let’s look at the same figures again, but this time making regular payments of $20 (i.e. 10% of the original amount, rather than 10% of the current balance).

Balance Repayments Repayments to date Interest Interest Sum Reward Benefit
Start 200.00 0.00 0.00 0.00 0.00 10.00
Jan 182.41 20.00 20.00 2.41 2.41 7.59
Feb 164.59 20.00 40.00 2.18 4.59 5.41
Mar 146.52 20.00 60.00 1.94 6.52 3.48
Apr 128.22 20.00 80.00 1.69 8.22 1.78
May 109.67 20.00 100.00 1.45 9.67 0.33
Jun 90.87 20.00 120.00 1.20 10.87 -0.87
Jul 71.82 20.00 140.00 0.95 11.82 -1.82
Aug 52.51 20.00 160.00 0.69 12.51 -2.51
Sep 32.95 20.00 180.00 0.44 12.95 -2.95
Oct 13.12 20.00 200.00 0.17 13.12 -3.12
Nov 0.00 13.12 213.12 0.00 13.12 -3.12

This is much better! The benefits of your rewards last an extra month, your balance has been fully paid off in 11 months, and in the end, you only gave your credit card provider about 1.5% of the original purchase price: not a bad rate at all!

Your mileage may vary, and this simple example is not realistic for most people (cashback cards are more likely to be 1-2%). What it does show, however, is that to get the most out of credit cards with rewards, you should pay off your balance as early and as often as possible.

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Credit Cards Guaranteed Approval

Posted on August 26, 2010 by Credit Cards With Rewards

Credit Cards Guaranteed Approval IllustrationCredit cards are so common, that’s it’s easy to forget that many people find it difficult to get one. Perhaps they have a poor credit history, or maybe they’re just starting out in life and haven’t built up any credit rating at all. So whether you’re a college student or a bankruptcy veteran, credit cards with guaranteed approval are a tempting offer.

Student Credit Cards

So what kind of cards are available? If you’re a student, you’ll probably have a very easy time getting some plastic. Credit card providers like to get you signed up as early as possible to instill lifelong habits. Therefore, you’ll be offered all manner of rewards, as well as guaranteed approval. Generally these rewards are in the form of cash back on certain purchases. In fact, most purchases have some form of cash back, but if you buy from an approved list of suppliers, it’s possible to get up to 20% cash back! Generally, between 1% and 5% is more common though.

The only real limitation of student credit cards is that in many countries, there are laws to rein in unscrupulous lenders. For example, in the US, under 21s have to prove financial independence, and may require an adult to accept joint responsibility for any debts incurred.

Bad Credit History

For others, there are many reasons to look for a guaranteed approval credit card, the most common being a poor credit history, or even bankruptcy. For those people unfortunate enough to find themselves in such a position, it can be difficult to get back on your feet again and start afresh. However, there are still cards available to you, and in today’s economic climate, it has actually become quite a competitive market. This is great news for people with bad credit scores, and it’s worth knowing that you should not jump at the first offer you see. Something better might be around the corner.

One type of card available asks you to supply a deposit equal to the amount of credit required. Although this may sound counterproductive, it’s actually a great way of enforcing discipline on yourself. The real advantage, however, is that the credit card provider will make regular reports to the major credit bureaus, which in time will improve your credit score. Furthermore, simply opening a new line of credit has a positive effect on your overall score, as long as you don’t close your existing accounts (and, of course, keep your spending under control).

If this is not an option for you, there are other innovative cards available. Some unsecured cards will still guarantee approval, even without credit or employment checks. In return, however, they may have lower credit limits, and impose application and monthly fees. Late payment fees will undoubtedly be applied too. The best of these cards offer fixed fees instead of charging interest, so be sure to look out for them!

Guaranteed Approval is Big Business!

In summary, financial difficulties are more common in today’s fragile economy, and credit card providers can no longer ignore this market. With a bit of shopping around, it’s certainly not impossible for those with poor credit scores to still get guaranteed approval on a card that will help them get back on their feet. And those with no credit history, especially students, may have a lot of options when it comes to credit card rewards too!

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Best Credit Card Rewards

Posted on August 22, 2010 by Credit Cards With Rewards

Best Credit Card RewardsWhat are the best credit card rewards? Well that depends on a lot of factors, as well as your own personal lifestyle.

It’s important to understand, of course, that credit card companies offer rewards so that you’ll be encouraged to use their cards for spending. On average, the interest they get back far exceeds the value of the rewards themselves. But by knowing where the pitfalls are, you’ll be able to choose the best option for you.

For example, are you being tempted by 0% APR credit cards balance transfers away from your existing account? That can be a great deal for some people, and if there are other rewards added on, it can seem like a no-brainer. Before you jump ship, ask if the introductory rate applies to new purchases too, because otherwise they may use any repayments you make against the old balance first, while new purchases are racking up interest at a higher rate.

As always with credit cards, read the small print. Do your purchases give you rewards, like cash back, right from the start, or do you have to clear your old balance first? Is there a straightforward cash back system (say, 3% of your total purchases), or do they use a ‘points’ system that you can’t quite understand? Are there limits to the rewards offered, like airline tickets that have blackout dates, or do they really meet your expectations in full? Some limitations are quite clear, like a credit card that offers great rewards, but only against certain purchases. This is quite common when credit card providers partner with other businesses to their joint benefit.

The best credit card rewards, therefore, are the ones you clearly understand. Don’t be afraid to question everything before deciding on a reward card, and if you truly want to make the very best of them, make sure you can pay off the balance in full every month.

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Credit Cards Balance Transfers

Posted on August 16, 2010 by Credit Cards With Rewards

Credit Cards Balance TransfersIf you’ve had a credit card for any length of time, then chances are that you don’t pay off the balance in full each month. In general, people with credit cards seem to have an unstoppable desire to keep them constantly in the red, with some actually treating their credit card limit as a target!

At first, this is ok, but at interest rates averaging around 15% APR, excluding any potential annual fees, eventually our addiction to credit cards can become a real problem. Most of your monthly repayments may, in fact, be paying off little more than interest and fees. Eventually, you’d love to hit the reset button and start again. That’s where credit cards balance transfers offer a very attractive option.

What are Credit Cards Balance Transfers?

Put simply, it involves one credit card company attempting to attract new customers by allowing them to transfer their existing credit card debt to a new account with them. To entice you over, the tranferred amount is usually subject to a far lower APR, with 0% APR credit cards for at least the first few months becoming increasingly common. And if you shop around, sometimes this rate can last for over a year, and can even apply to purchases too.

Where’s the catch?

Although it certainly sounds tempting, there are a few points to be aware of.

Firstly, your credit cards balance transfers could be enjoying 0% APR, but that doesn’t mean there are no other fees involved. Check the fine print for transfer fees, and compare annual fees with your existing credit card account.

Next, always be aware the the introductory offer will end at some point, so make sure the ‘normal’ APR is competitive, and that you’re not losing any rewards from your existing account that you’ve come to depend on.

Finally, if your credit score is important to you, thread carefully. One of the criteria you’re judged on is the length of credit history, so if you keep transferring balances every few months, it will reduce your score, because your ‘average’ length of credit history will be less than before.

Even more importantly, think twice before closing your old account, unless the annual fees are extortionate. Keeping it open gives you a better debt ratio, which is a large part of your credit score. For example, if you’ve got a $2,000 balance on a $5,000 credit limit card, then transferring to a card with the same limit while keeping your original account open means that you’ve effectively got a $2,000 balance on a potential $10,000 credit limit. To a credit reporting agency, this looks positive, and increases your credit score.

Conclusion

Everybody’s circumstances are different, and credit cards balance transfers won’t suit everyone, but as long as you’re aware of the advantages and potential pitfalls, it can be a very useful facility to take advantage of.

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