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Paying The Price Of Credit Card Jumping

Aug 17, 2007
Having a debt and paying no interest on it seems almost too good to be true. But many consumers use their credit cards to do just that. The process is known as rate surfing or credit card jumping.

How Do I Start?

Many companies offer preferential rates to new customers. These can take a variety of forms. Some credit cards offer long term low interest rates. Others offer a 0% rate on purchases for a fixed period, usually six months. Still others offer a 0% interest rate on balances transferred to the card. This last type of offer is the one that is of most interest to card jumpers.

All people need to do is apply for the card as usual. Most forms, whether online or in print, have a section where applicants can write the card numbers of the cards they hold and the amounts they want to transfer. Balances can be transferred from other credit card and from store cards.

Some companies also allow new applicants to transfer loan amounts by using credit card cheques. It is worth checking that such cheques also enjoy the 0% balance transfer rate. Cheques are often treated as cash withdrawals and can attract a higher interest rate.

How Does This Jumping Work?

The key to successful jumping is to move the outstanding balance to another credit card with a 0% rate just before the interest free period expires. This means:

- Finding a new deal with a 0% balance transfer rate (maybe by looking on the internet)
- Applying for the new card at least a month before you want to transfer the balance
- Transferring the money from the old card at least a week before the interest is due to be applied.

This is not a difficult strategy for anyone who is well organised. To avoid hurting their credit rating, which could lead to refusal for other cards, it is essential for card users to make at least the minimum payment each month. The payment should also be made on time.

Do Companies Make Money From Jumpers?

They don't - or at least they didn't. Credit card jumping has cost credit card companies hundreds of thousands of pounds each year. That's why credit card companies have come up with a new way to make money from jumpers. It's called the balance transfer fee. The balance transfer fee is a fee of around 2% that is applied to balance transfers. This means that credit card companies get their money up front.

This is not good news for credit card jumpers, though credit card jumping may still be worthwhile if the current interest being paid on the debt is high. Although many companies apply a balance transfer fee, not all do, so it is worth shopping around. There could still be time to do some credit card jumping.
About the Author
Joe Kenny writes for the Credit Card Guide, offering views on credit cards in the UK, visit them today for some great 0% balance transfer offers and start clearing credit card debt today.
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