How risky are 0% credit cards?

[EightyfirstCat]

An acquaintance of mine thinks they're being clever by racking up debt on 0% credit cards. He says you can just transfer it to another card when the term runs out. I don't think he intends to pay it off, just keep transferring. I've always been careful with money and I don't know much about credit cards because I don't use one. I started telling them that it was a bad idea to do that, but I couldn't really work out why as I don't know enough about it.

I assume people get caught out by these deals, but how exactly? Is it really possible to keep transferring your debt to new places and never pay any interest?

Well it's fine if you're transferring without paying fees and you're not paying interest , it's called stoozing. It's only worth it if you are getting a good interest rate on savings and you set up a direct debit to pay the minimum payment every month.

At some point they may no longer by 0% deals or he may not be eligible for them (retirement age) and then he will be accruing interest of this money. Or on his death his estate will still be liable for the debt so if he is hoping to leave something behind for loved ones then his debts will need to pay off his debt first and they will get whatever is left.

I had a colleague who did this for years.

Never aware it came back and bit him but clearly it can particularly if you're racking up more debt and adding it upon each change of card.

I've been doing this for about 20 years and haven't been refused so far. I make a few hundred pounds a year from it.

However, if you don't have the savings to match, the risk is that you can't get a new card, you have to pay the debt off or pay interest, which could work out very expensive. If you've been doing it to supplement your income, if could fall into a bad debt situation quite quickly as the payments could rise significantly as you'd have to at least pay the interest every month.

You also have to be on the ball because if you miss a payment, they could take the 0% offer away and mark your credit file with a late payment, which could make it harder to get another deal, at a time when you actually need it.

It's totally fine to do this if you know what you're doing. I keep a few grand on interest free and when it comes towards the end I decide whether to transfer it (sometimes there are fees) or just pay it off from my savings. I always have much more available in savings than I do on the card so could pay it off any time if I needed to or couldn't find a suitable transfer deal. Not at all risky if done this way. Assume many people do similar.

If you do it sensibly, then it’s what a lot of people with a manageable amount of debt do.

Have they got the savings to cover it, that makes a big difference or are they just in debt. It's more worth doing it now savings rates are going up. People used to do similar with student loans but I don't think they do so much now, probably because savings rates were very low

0% credit cards are only risky if you let your debt get out of control.

They can be good if you need to buy yourself time to pay off your debt, however if you continue increasing your total debt amount, you could get stuck in a hole that'll feel impossible to get out of

I think they just see it as free money that they will never have to pay back as long as they keep moving it around ?