Money Forward

This blog is about money and trying to keep my money from flying out the window.

Wednesday, January 31, 2007

Wrongful attack on a balance transfer player

I found this article on Boston.com today.

The guy (a retiree) has about $45,000 in credit card debt that he just transfers between 0% balance transfers options. He's making about 8-9% in interest. The author goes a bit crazy saying how this is such a bad deal. I totally disagree.

The guy does have money in risky investments, but 8-9% returns shows that he's not going too crazy on what he's putting his money into. He probably won't lose all of his money if the market crashes (although anything can happen). The guy has enough to pay off the balances, so he's not worried about anything.

The author goes all wrong talking about the bad things that happen to your credit report when you do these offers. This is where the author has no idea what he's doing. The guy is a retiree. He will most likely not be getting a mortgage ever again, so I don't see why that is mentioned. If the guy knows what he's doing, he's not worried about getting any loan at all. This guy is not at the beginning of his credit life, he's getting closer to the end. So what if he has a few points off of his credit score. I'm sure he's not going to be affected.

This author just doesn't understand the game, or doesn't have the organizational skills to do it. He shouldn't be bad-mouthing people that are playing the game and winning.

Why I hate this article:

Credit cards should be used only as a safe and convenient alternative to
carrying cash. Ideally, you should not incur more debt than you can pay off by
the end of the month, thus avoiding any interest charges. (OK, go a bit longer
after the holidays or a vacation. But not more than two or three months.)

Holidays and a vacation are not really a good excuse.

Opening numerous card accounts, and frequently shifting money between
cards, without reducing the overall debt, is a red flag that could hurt his
ability to borrow money in the future... In fact, this behavior with credit cards is likely to hurt one's ability to get a mortgage or car loan, as well.
The guy is a retiree! Annoying.

3 Comments:

  • At 7:39 PM, Anonymous samerwirter said…

    Yeah that article is pretty ridiculous.

    The details on the credit card debt are sparse, but the guy juggling the credit cards seems to be doing it for fun, not because of a spending addiction.

    On the one hand, I think it would be irresponsible for a personal finance newspaper columnist to recommend this strategy. His audience is too broad.

    On the other hand, he shouldn't knock it. Really, I think the whole topic is just inappropriate for a newspaper to cover.

     
  • At 12:31 PM, Blogger MoneyFwd said…

    I agree. The author should have ignored it, or found someone that was actually transferring balances because they didn't have the money to pay the debt.

     
  • At 5:59 PM, Anonymous Golbguru said…

    Yep, annoying in the least. There is some sense but he is busy trying to prove how the other guy is wrong and things get lost in between.
    It's sensible not to borrow and invest in a stock market (unless you are a risky player), because, in case things go wrong (stuff happens) you will need to pay everything back.
    Putting it in a high interest bank account would be playing it safe and nice.
    But yeah...the author seems too "spiteful" than rational

     

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