Can you switch credit cards annually to avoid interest if you have no outstanding balance?

Question

I am aware of how balance transfers work, and that there are various things to consider with that.

However, I generally treat my credit card as a debit card, paying it off fully at the end of each month. However, I'm planning on using the card for slight leverage in upcoming months and am likely to accrue a balance of $4000-6000 for a period of a few months.

Currently, I'm in the 15-month period of 0% APR but it inconveniently expires very soon, at which time it becomes 20%.

Can I just cancel this card and get a new one to get back into the 0% period? I have zero outstanding balance and an excellent score. Is this standard practice? I'm trying to figure out why it wouldn't be.

Answer 1

If you read a bit on this site you will see warnings about closing accounts.

Yes, what you propose to do can work, as long as your timing is right, and you watch your score. You get a minor ding for pulls to your report (credit inquiries), for high utilization, and for low average account age. For your goals, you should only get cards that have no annual fee, and let them accumulate. At some point, you will have enough available credit that any balance wont cause high utilization, and canceling a card wont kill your average age.

Answer 2

It is kind of standard practice, and the way you are proposing you should be just fine provided nothing goes wrong. As I understand it, you will get a new 0% card and charge this large purchase on it.

Many get into trouble when something does go wrong such as missing the end of the zero percent, or missing a payment. Anything of those kind of situation typically triggers a penalty interest rate which is higher than the 20%. Please understand 20% is ridiculous with current rates and reasonable credit.

Some people, that carry a balance at the end of a 0% period, do a balance transfer. The problem with balance xfer's is they often charge a fee, typically around 5%. If one choose to pay off their balance within a year, then the effective interest rate is around 7.5%, a long way away from free. While the 5%->7.5% effective rate is much better than 20%, the chances for something to go wrong increases with time. The more times a person does this the more likely they will hit the penalty interest rate.

While periods of leverage are necessary, borrowing to do so is best avoided. Can you work more and save up part or even all of this amount? Can the cost be brought down?

Once this period is complete, I encourage you to work as hard as possible to get it paid off as quickly as possible.

Answer 3

If you pay on time and in full, you will pay no interest even if you keep the same cards.

Balance transfers are rarely zero-interest for long, if at all, specifically to keep people from churning through cards to avoid interest.

Summary: Don't bother trying that; fix your borrowing problem instead.

Answer 4

Having a significant credit card balance and a college loan accumulated over the years, I’ve used the balance transfer offers sent out by my card companies (though not getting new cards for this purpose). This enabled me to pay reduced interest on the transferred amounts, while working on paying off the higher-rate ones.

But this brought up the problem of “looking ahead” at expiration dates of such transfers, to make sure to not get hit with the cards' standard (fairly high) rates on those transferred balances as mentioned by @Pete in his answer. For about a year, I used a spreadsheet to keep track; subsequently built a spreadsheet-like program to help; and finally built an “intelligent look-ahead” system to optimize the monthly payments to each card, which, given a fixed monthly budget, helps minimize the interest paid out over time.

I hope this is a useful approach to the problem, so I’ve made it available online at https://xeroed.com, free to use for everyone. I would love for readers to use the system and hopefully minimize and save on interest!