What to Look for in a Balance Transfer Card: The longer your credit history, generally the better. Closing it will remove the available credit from your credit report and cause your utilization to rise. In fact, this is a good rule of thumb in general because length of credit history also has an impact on your credit score. The key to all of this, of course, is that you keep your old credit card open after transferring the balance. The positive effect of this change will almost always outweigh the small negative effect of a hard inquiry on your credit report, as credit inquiries do not affect your credit score as much as utilization does. High utilization can negatively impact your credit score, even if you are paying your bills on time every month.īy opening a balance transfer credit card you are increasing your available credit, which lowers your utilization percentage and therefore will likely improve your credit score. Put simply, your credit utilization rate measures the percentage of your total credit lines that you are using. To calculate this, divide your credit balances by your credit limits. This is mainly due to a reduction in your credit utilization rate, which is the second biggest factor in determining your credit score. In many cases, a balance transfer card might actually improve your credit score. So, how will a balance transfer card affect your credit? The answer may surprise you. How Do Balance Transfer Cards Affect Your Credit? This makes balance transfer cards a powerful short-term tool to wipe out debt when used responsibly, but a dangerous strategy when used to prolong your debt problem.
In some cases, you might even be subject to deferred interest on the total amount transferred. The catch is that the low or 0% interest rate only applies for a short time. On top of that, the introductory interest is typically followed by an interest rate that is a bit higher than most other cards in the industry. Once transferred, you will typically be given about 12-18 months of low or no interest on your new balance. This, in theory, allows you to pay off your debt faster and with less money lost to interest expense. The introductory interest is the important factor here there is no point in transferring balances between cards otherwise. Balance transfer cards do exactly what their name implies: they allow you to transfer balances from other credit cards to your new balance transfer card with low or zero introductory interest.
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