June 29,2009
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How to Handle Debt, Pt.1
Beware of CC Offers.A friend of mine, who has a reputation for being very credit card savvy, told me how she made one of the dumbest moves of her life. She became the latest victim of the slash your credit without notifying you game that financial institutions are playing that will most likely end up costing her a small fortune. My friend has a prime credit score and has remained current on all her credit obligations including mortgage, auto loan, and credit card. She has an excellent payment history and no negative spots on her credit report. She thought she would do the sensible thing by transferring her auto loan balance of $14,000 (which by the way was already at a low of 5% interest rate) to her home equity line. The day she was online and preparing to make the transfer, she received a balance transfer offer from her credit card lender at 0% interest for eight months. She fell for the offer and paid off the auto loan with the credit card with the intention of transferring it on to her home equity when the offer expired.
I guess you can only imagine what happened next. When the promotional time was nearly up, my friend went online to pay-off the credit card account with her home equity line. To her surprise and outrage, she discovered that her bank had slashed her equity line and there was nothing available to pay the card off. Her financial institution did not notify her that they were slashing her line of credit despite the fact that she had never been late once during the life of the account. She now sat with a very large credit card balance paying double in interest than she was paying with the original auto loan.
My friend complains on a regular basis about her poor choice in trying to outsmart the banks. Consumers must be aware that the rules have changed. Banks are participating in very creative ways to bleed profits out of customers to help them recoup lost profits from large numbers of credit card defaults. Responsible customers are being hurt by it. Before you make any financial decision, you should seek out assistance from a reputable expert. It could save you hundreds of dollars.