Readers sound off about credit-card hopping

A few weeks ago, I told you about a reader named Michele who had an interesting plan for managing debt.

Michele, age 60, wrote that, in addition to a mortgage and a home equity line of credit, she and her husband have about $70,000 in debt on credit cards with interest rates ranging from 0 percent to 2.99 percent. They keep that debt at low rates by moving it from one card to another as introductory offers expire.

This method has helped boost their credit score to 840, she wrote, and saves them on interest expenses.

I said at the time that her plan, while workable for some, has risks that make it a bad idea for others. Many of you agreed.

Wendy wrote to say, "Michele obviously has more time than the rest of the planet to keep track of what's due when on which card and loan."

Debbie wrote that, in Michele's excitement about her credit score, she seems to be forgetting that she is thousands of dollars in debt.

"With that kind of money owed, good credit score or not, how could they ever hope to retire? It just seems very irresponsible in my view to just keep spreading the debt around, like a kid spreading peas ... around on his plate because he doesn't like the way they taste," Debbie wrote.

Another reader, Lori, agreed that Michele's method can work for a while, but you "have to be really on top of it."

"If you are late on even one payment within the introductory offer period, they raise your rate to over 20 percent APR," Lori wrote. "I've utilized this bounce-a-balance system a lot, but changes in federal law ... changed this 'shell game' into a more risky, more expensive venture. Also, credit card companies can change the terms of their card at any time, and a card holder's only option is to cancel the credit card, or go with the terms. This becomes more risky the higher your balance."

Lori also reminded me that most credit card offers include a fee for balance transfers, often running around 3 percent of the total amount you're transferring.

"This amounts to hundreds of dollars when you're dealing with balances of $35,000-plus, as Michele apparently is," she wrote. "When you start bouncing your balance every six months to a year, that adds up to hundreds more in debt in a short period of time."

Lori wrote that playing the credit card game can work for short-term financial needs, but if you try to use it as a lifestyle, "it's only a matter of time until you have to pay the piper."

"It seems to me that people such as ... Michele lack the fundamental understanding of the fact that being in debt, even under good terms, gives someone else a lot of control of your financial picture," she wrote. "When the entity loaning that money decides to change its policies, you have no options.

"To consider your home as a spendable asset, and huge credit-card balances that you can bounce, as long-term lifestyle options, is to set yourself up for real financial problems. ... For young people to establish this spend and debt pattern as a staple of financial management is to be set up for poverty and insecurity in later years. Especially, as I said, when someone else is basically dealing all the financial cards."

I couldn't agree more. Michele feels this plan is working for her. But I don't recommend it to anyone. It's just too risky.

Thanks for your comments, Wendy, Debbie and Lori.

If you have another take on this issue, or if you have a different financial question, send it to gkratz@desnews.com or to the Deseret Morning News, P.O. Box 1257, Salt Lake City, UT 84110.

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E-mail: gkratz@desnews.com