Is This a Clever Credit Card Strategy?

Jeff Brown from the Philadelphia Inquirer recently wrote a column explaining one of his reader’s strategies for combating credit card debt.

The reader had amassed more than $45,000 in debt and was taking advantage of introductory free interest periods. He would transfer the balance from an existing card to a new card while he invested the amount owing at 8-9%.

So what’s wrong with this strategy? These were Jeff’s suggestions;

1. To earn an interest rate of 8-9% on cash you need to be investing in some fairly risky ventures. The problem ten becomes enlarged if the investment fails or dips substantially and leaves him with less cash than he first had.
2. Zero-percent credit card deals abound with small print problems. Any default and the rate will increase exponentially.
3. His credit rating will suffer and potentially prevent him from gaining access to future borrowings. Credit rating societies are able to track these dealings diligently and will automatically send up a red flag as the amount of debt won’t decrease.

I would add another to this;

4. For this strategy to have any effect it requires multiple applications for credit cards. Trying to keep up with the application processes and timing of receiving and transferring debt balances would be tricky at best.

The best strategy when dealing with credit card debt is to pay it off as fast as you can. While it is the most convenient debt instrument it comes at a price and using it as an investment tool is hardly wise.