Credit card juggling: Don’t try this at home

YOU’VE heard the common financial advice that you shouldn’t get into debt. Here’s the hard version: get into lots of debt, but be disciplined.

YOU’VE heard the common financial advice that you shouldn’t get into debt. Here’s the hard version: get into lots of debt, but be disciplined.

Banks and financial institutions are increasingly advertising 0 per cent interest periods on credit cards, either as introductory or balance transfer offers.

If you’re willing to put in a bit of effort, you can take advantage of these offers to continually roll your debt over — and never pay interest again.

Insurance claims specialist Adrian, 31, juggles six credit cards with more than $40,000 worth of credit limit at any one time. All it takes is a bit of financial discipline, he says.

To keep his mortgage interest repayments as low as possible, he puts his entire salary into an offset account — if you’ve got a $200,000 mortgage with $20,000 in your offset account, for example, you’ll only pay interest on $180,000.

Living expenses are paid for on his credit cards. He plans ahead to repay around $1000 each month, decreasing the credit limits as he goes, looking other cards to transfer the balance at the end of the grace period.

“Of course the catch is to make the minimum payment on each card on time and have it transferred to another card at 0 per cent before the introductory offer is over,” he says.

“In this competitive banking environment it’s not difficult at all and if you keep paying on time, your credit history will be excellent and no banks will reject you.”

Adrian, 31, juggles six credit cards on 0 per cent interest offers at any one time.

Adrian says it only works when you:

• Have a good credit history

• Already have some cash on hand

• Are disciplined in repaying the debts

• Don’t use the credit cards to buy unnecessary stuff

• Keep it to a certain combined credit limit

“The only downside is that each card will incur an annual fee, but again, they would waive them or give you a credit back if you say you no longer want the card, and some cards have no fees in your first year,” he says.

“On average, annual fees are only $45 to $90 per year anyway so not that much considering all the interest you saved over the course.”

He says he completely disagrees with the common financial advice to not get into debt, or limit yourself to one credit card. “It defeats the purpose of competition between banks,” he says.

“If you’re a disciplined spender you should leverage 0 per cent interest, especially if you have a mortgage attached to an offset account. It’s about the only time you can borrow money from banks at 0 per cent.”

Carmel Franklin, chair of Financial Counselling Australia, says while she wouldn’t necessarily disagree with this technique, she doubted many people would be disciplined enough.

“You’d almost have to have a spreadsheet to keep track of it all,” she said. “For people who are financially savvy and understand how they can maximise the benefits from credit cards and offset accounts, then that’s great.

“But for a lot of people using credit becomes too easy, something goes awry and you end up spending more than you anticipated. Credit cards per se aren’t bad, it’s just about managing it — and the suggestion he’s come up with requires a fair bit of management.”

NAB is one bank aggressively promoting its 0 per cent credit cards. For its part, a spokesman couldn’t comment on whether NAB takes a particular view on customers closing and reopening accounts before the grace period expires.

“NAB assesses every customer on a case-by-case basis and looks at a range of factors, including their ability to manage debt, before providing credit approval,” he said.

“In the past year NAB has seen a six per cent increase in the number of credit card accounts paid in full. Customers must adhere to the terms and conditions of their card.

“NAB encourages customers to talk to a banker about what best suits their needs before they apply for any particular product or offer.”

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