Balance transfers to zero-interest credit cards tempting but dangerous

So many individuals today are struggling to make ends meet. Inflation simply has not caught up with the cost of living. As a result, consumers are getting creative to help reduce their monthly obligations. However, some of the tactics could prove problematic in the long run-particularly for those with vehicle loans.

Zero-interest credit card offers

One tactic specifically involves zero-interest credit card offers. As a way to entice consumers, companies are extending offers that include zero-interest credit card rates for balance transfers for a certain period of time. Some credit card companies are even allowing consumers to transfer any loan balance-including car loans.

And the marketing efforts have paid off; many consumers have taken advantage of the too-good-to-be-true proposal and are transferring their auto loans balances onto these credit cards.

The offer seems like a great financial move. However, there downsides to these great introductory zero-interest rates.

Problems associated with transferring debt onto a credit card

Typically, the offers only last for a short window of time. Many companies only offer this rate for a few months; other, more liberal companies, extend the offer to 18 months. But, once the window closes, a high interest rate typically takes effect.

In the short-term, consumers may save money by bypassing interest payments on the amounts they borrow. And, for those transferring auto loans balances, prevent the possibility of repossession.

However, in the long-run, they may end up paying more in interest than they would if they simply stuck with the original vehicle loan. By failing to pay off the transferred auto loan within the zero-interest introductory period they are stuck with a huge interest rate when the intro period ends.

Additionally, consumers transferring auto loan balances to credit cards actually hurt their credit scores. By transferring debt on to a credit card, they are trading "installment debt" for "revolving debt" which negatively affects their scores. This is because installment debt is traditionally secured debt and much less risky than revolving, unsecured debt like a credit card.

Considering bankruptcy

Financial experts recommend thinking through the decision before consumers take the leap. However, individuals struggling to pay off debt, like auto loans, credit card debt, or even medical bills should consider bankruptcy as an option. Bankruptcy can erase unsecured debt giving consumers struggling to make ends meet each month a fresh start.

Speaking with an experienced bankruptcy attorney who can offer advice on an individual basis is advised.