Balance Chasing

[Anonymous]

Hi,

I was curious about the definition of " balance chasing"

Is it bad or good?

[LS2982]

Bad. It's when a creditor is lowering your credit limit as you pay your balance down to whatever your current balance is until your at zero then closing the account. This usually occurs when new baddies pop up and utilization rises quickly, they want to minimize their risk (the creditor).

[Anonymous]

Sorry, I did not mean CLD.  I meant, for example.  I have lets say 2k on a 0 % deal and I haven't finished paying it off.  So I app for a different card that offers a new term of 0%  and transfer the old balance there.  

[LS2982]

IMO I think it could be bad because your adding new INQ's and accounts but if your ok with history and current INQ's then it should be fine.

[Crashem]

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@Anonymous wrote:

Sorry, I did not mean CLD.  I meant, for example.  I have lets say 2k on a 0 % deal and I haven't finished paying it off.  So I app for a different card that offers a new term of 0%  and transfer the old balance there.  

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that isn't balance chasing.  In any case, you can get away with it for a little bit.  However remember most 0% bt offers have a bt fee.  So there is a cost.

[tboy1977]

With balance chasing, they either decrease your credit limit to what you owe and then continue decreasing the credit limit until the balance is paid off.  They can close the card at zero, or the CL is like one or max two hundred dollars.  It's a major reason why I love my secured credit cards.  I don't want some minor moment ruining my credit. 

Imagine this scenario.  You have a wallet full of only prime cards: AMEX, BofA, Chase, Citi.  A minor collection hits your account.  That is negative in itself. If one card decreases your CL to balance, that ups your balance percentage and thus decreases your score further.  The decrease in score could cause the others to follow suit.  When its over, you either have no open cards or cards with $100 or $200 limits.  If everything is closed, since its closed by credit grantor, that's a negative.  Now you are rebuilding credit, since technically you have none.  And that can happen in ANYBODY!!  Or you have a couple of useless cards: honestly, what can a $100 limit give you?  You are no longer in prime territory.

Thank God they outlawed universal default directly.  Under universal default, the interest rates would have been raised to 29% or whatever default is, just because you credit score went down even if you had no problems with their account.  So imagine the 0% (or 12%) suddenly becoming near 30%.  Harder to pay off?  Yeah, it sucks.  And your reward for not just jumping ship with the creditor.  No charge-off.  Either way, you still end up with no card or one that is useless.

[tboy1977]

When you say transfering to balances to a 0% interest card and paying on it, then transferring it to another card, that is not balance chasing.  You are chasing the 0% interest, but the creditors see you as credit-worthy.  In balance chasing, your creditors no longer see you as creditworthy and either want to eliminate you or reduce their risk SEVERELY.  Be careful with the 0% percent cards.  If you are sloppy with them, you can end up in more debt than ever.

[Crashem]

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@tboy1977 wrote:

With balance chasing, they either decrease your credit limit to what you owe and then continue decreasing the credit limit until the balance is paid off.  They can close the card at zero, or the CL is like one or max two hundred cards.  It's a major reason why I love my secured credit cards.  I don't want some minor moment ruining my credit. 

Imagine this scenario.  You have a wallet full of only prime cards: AMEX, BofA, Chase, Citi.  A minor collection hits your account.  If one card decreases your CL to balance, that ups your balance percentage and thus decreases your score.  The decrease in score could cause the others to follow suit.  When its over, you either have no open cards or cards with $100 or $200 limits.  If everything is closed, since its closed by credit grantor, that's a negative.  Now you are rebuilding credit, since technically you have none.  And that can happen in ANYBODY!!  Or you have a couple of useless cards: honestly, what can a $100 limit give you?

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it's a horrible situation.  Lots of different relationships helps though.

[Anonymous]

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@tboy1977 wrote:

When you say transfering to balances to a 0% interest card and paying on it, then transferring it to another card, that is not balance chasing.  You are chasing the 0% interest, but the creditors see you as credit-worthy.  In balance chasing, your creditors no longer see you as creditworthy and either want to eliminate you or reduce their risk SEVERELY.  Be careful with the 0% percent cards.  If you are sloppy with them, you can end up in more debt than ever.

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Duly noted, this is a very close answer to my question.  I am prime all the way, but I understand the slippery slope to hell - hence I always set up auto-pay right away.  I am not creating more debt, - meaning, I pay all my regular charges asap - dining out etc.  This is more about large, one time yearly purchases for work etc.  So I guess I call it "chasing the 0% interest rate"? 

[tboy1977]

EXACTLY!!! :-)