Why is it that you can%26#039;t just transfer debt from one credit card to another by paying each one off before it charges interest using another credit card or loan, not gaining any interest, and chipping in a little of your income each time around to chisel away at the debt until it%26#039;s gone. It seems theoretically possible, but I%26#039;ve heard it can%26#039;t work. Why not?
Why doesn%26#039;t debt circulation work?
In theory only it could work (%26amp; not even that well). In reality, it never will. One reason %26amp; probably the biggest %26amp; main one: most all card companies charge a fee for balance transfers of typically 3%. So each time you would make the transfer (which would be every month), you would add 3% to the balance.
Assuming you never charge another thing ever, you would be paying a 36% interest rate (as a processing charge not finance charge) %26amp; your balance would be ever increasing %26amp; eventually be larger than your credit limit.
Lets say you try with 3 cards, each with $10k limit. 1st month, you charge $5k on it %26amp; begin the dance from card to card. At 36%, it would take you less than 2yrs to max out the 1st card. (remember, you never charge again. That means that each subsequent transfer, you cant do the full amount %26amp; will be subject to the fee %26amp; interest due.
You would have to have an endless source of credit to keep it going b/c every year you would have to add new cards to the line-up. And its just plain hard work keeping up with that!
Why doesn%26#039;t debt circulation work?
credit card companies won%26#039;t let you pay their bill with another credit card. So if you withdraw cash (cash advance) on a credit card, there is now a new charge. Yeah, I thought that same thing as you several years back...and that%26#039;s what I found out.
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