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Do Balance Transfers Hurt Credit Score

Do I Have To Close My Credit Card After I Transfer My Balance

Do Balance Transfers Hurt My Credit Score? (EXPLAINED)

No, once your balance transfer is complete your old credit card will not automatically close and it will stay open. You want to keep all your credit cards open because they will increase your credit score. When you close a credit card you are decreasing your available credit limits, credit age and on-time payment history. If your old credit card has an annual fee that you dont want to pay try waiving the annual fee before you close it.

Related: How To Waive Annual Fees On Credit Cards

What Are Balance Transfer Credit Cards

Have you heard about balance transfer credit cards? Balance transfers are a popular way to consolidate debt, lower your interest rates and pay off high-interest credit cards. In this article youll find the answers to some of the most frequently asked balance transfer questions. Well discuss everything from what balance transfers are to how they work and what risks come with them so that you can make an informed decision about whether or not a balance transfer is right for you.

A Balance Transfer Credit Card Is A Good Idea If:

  • You want a lower interest rate. The biggest perk of 0% intro APR balance transfer credit cards is how much money they can save you. If you have credit card debt that you’ll be paying off over six months or longer, then a balance transfer could lead to big savings.
  • You want to consolidate debt. When you have debt spread out across multiple credit cards, it can be difficult to manage. A balance transfer card allows you to consolidate debt so you only need to make one payment per month.
  • You’re trying to boost your credit score. Credit card debt often results in a high credit utilization ratio, a factor that has a big impact on your credit score. Since opening a balance transfer card adds to your total credit, it will lower your credit utilization. That balance transfer could save you money and raise your credit score.

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Citi Double Cash Card

The Citi Double Cash Card is both a balance transfer and cashback card, which is why we like it. It has an introductory 0% APR period of 18 months. The balance transfer fee is $5 or 3%, whichever is greater, and you can earn up to 2% cash back on all purchases: 1% as you buy and 1% as you pay.

Earn Cash Back Twice

Card Details

  • Earn cash back twice: 1% when you buy + 1% when you pay
  • up to 2% cash back on all purchases: 1% as you buy and 1% as you pay
  • Intro balance transfer 0% offer: 0% for 18 months then 13.99% to 23.99%

What Is A Balance Transfer Credit Card

Do balance transfers hurt your credit score?

Balance transfer credit cards are cards that can receive balance transfers — a feature not offered by all credit cards. A balance transfer is moving a balance from one account to another. Once you’ve completed a balance transfer, the original account is paid off, and you make payments on the account that received the transfer.

You’re essentially using the balance transfer card to pay off your debt. The best balance transfer credit cards come with a 0% introductory APR — similar to 0% intro APR credit cards — on a qualifying balance transfer. This means that you won’t pay on the balance transferred for the intro period, which can be anywhere from a few months to 20 billing cycles. After the introductory APR ends, the card issuer will start charging the card’s regular variable APR on any remaining balance. Paying off your balance quickly will help you avoid getting an interest charge when the intro APR period ends.

The type of debt you can transfer depends on your balance transfer card. Sometimes a card issuer will only let you transfer credit card balances, whereas others let you transfer all kinds of debt. Consumers typically use balance transfer cards for credit card debt.

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Is There A Limit To How Much You Can Transfer

You can never transfer a balance that’s larger than your credit limit. Some balance transfer credit cards will only let you transfer up to a percentage of your credit limit — usually 70% to 95% — while others will let you reach your credit limit. Keep in mind that any balance transfer fees will add to your balance as well. If you’re transferring a $1,000 balance to a card with a 3% balance transfer fee, you’ll need a credit limit big enough to cover a $1,030 balance.

Types Of Balance Transfer Cards

Various banks and credit card companies offer balance transfer deals. Typically, these accounts fall into one of two categories: cards that are meant for the sole purpose of consolidating or restructuring debt and those that offer rewards programs and are meant for long-term use.

Before settling on one of those categories, consider how you intend to use the new account. Cards that are not designed solely for balance transfers have their drawbacks. For example, a rewards card might offer 12 to 15 months of 0% interest, whereas a card designed for debt consolidation and balance transfers might offer a low interest for a longer promotional period lasting up to 21 months. Its also important to note that certain balance transfer cards might waive the typical transfer fee.

One big advantage of balance transfer cards is the potential to greatly reduce the amount of interest you pay on your debt. By lowering interest, you have the opportunity to put more money toward the principal amount you owe and potentially pay off your debt faster than you would be able otherwise.;The biggest drawback, however, is the possibility of mismanaging your credit cards and racking up more debt instead of paying it off.

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Can You Transfer A Balance Transfer

Most banks will not allow you to transfer a balance from one card or account that it owns to a new balance transfer account that it also owns. You can, however, open a new balance transfer account with a different bank and use that line of credit to pay off whats left unpaid from a previous balance transfer. That said, continuing to transfer a balance and not reducing your debt could be a sign that you need to take a hard look at your money habits and the state of your finances.

What Is A Balance Transfer Fee

How Does a Large Balance Transfer Affect My Credit Score? – Credit Card Insider

A balance transfer fee is a fee charged for moving a balance onto a new credit card. The balance transfer fee is charged by the balance transfer card . It’s typically between 3% and 5%.

The balance transfer fee is charged as a percentage of the amount transferred and typically added to your overall credit card balance. For example, if you transfer $1,000 to a credit card with a 3% balance transfer fee, you’ll be charged a $30 balance transfer fee. Your new balance on the balance transfer card will be $1,030.

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What A Balance Transfer Is

The term balance transfer describes the process of moving debt from existing credit cards or loans to an alternative credit card account. Many people open a new credit card and transfer balances to it. But you may be able to perform a balance transfer with a credit card you already hold.

Balance transfer offers frequently feature lower annual percentage rates for a limited timesometimes for a year or longer. For example, a credit card company might offer balance transfers to new cardholders that feature 0% APR for 18 months. A credit card issuer you already do business with might offer you a chance to transfer balances at a special, limited-time rate.

When you take advantage of a 0% or low introductory APR balance transfer offer, you can potentially save quite a bit of money. Also, since interest is either on pause or reduced with many balance transfers, you may be able to reduce or pay off your debt faster.

How Can A Balance Transfer Improve My Credit

Getting a balance transfer card allows you to consolidate one or more credit card balances into one, simplifying your repayment process. As you continue to make on-time payments on your new card, your credit score will benefit from the positive payment history. On the flip side, missing payments could damage your score significantly.

Also, if your new balance transfer card has a higher credit limit than the original card, it could lower your credit utilization rate, which can help improve your credit score.

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Anyone Can Qualify For A Balance Transfer

Each credit card issuer sets its own standards with regard to borrower eligibility. And many issuers will only approve balance transfers for applicants with decent credit already. If your credit score is too low, it could prevent you from qualifying for a balance transfer, or for a good offer on one. So it could pay to work on boosting your score before you apply.

Is A Balance Transfer Good Idea

Does A Balance Transfer Affect Your Credit Score?

A balance transfer allows you to move an existing balance from one or more credit cards to a single card usually one with a low or 0% introductory interest rate. But there are pros and cons to balance transfers.

Your level of debt wont change, but the main benefit is this: During a;0% interest introductory period, your debt wont grow with interest charges while you work to get it under control.

The best balance transfer credit cards typically offer a 0% intro annual percentage rate for a specified period, usually 12 to 21 months.

Lets look at an example of how this works. Say you have the following cards in your wallet:

;
36 months 0 months

Youre motivated, so you want to pay off the balances on Cards 1, 2 and 3 in the next 12 months. Transferring those balances onto Card 4, which has a 0% intro APR for the first 12 months, could save you up to $665 in interest.

Just dont forget to factor in the balance transfer fee when calculating your net savings. Balance transfer fees are typically 3% of the amount you wish to transfer.

You can use this balance transfer calculator to help you run scenarios to decide if a balance transfer card makes sense for you.

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A Rejected Application Will Also Be Recorded

As well, if any of your balance transfer card applications are rejected, it will affect your credit report and score even more. Make sure you can meet all the eligibility requirements before you apply. Its best not to apply for a credit card if you dont think theres a reasonable chance that your application will be successful.

Tips For A Balance Transfer Credit Card

  • Use your balance transfer credit card for debt only. You should only use your new credit card for your balance transfer and to pay off the debt you own. Use a good rewards credit card to make new purchases instead of using your balance transfer credit card as these credit cards dont come with good rewards programs.
  • Pay On Time. Most credit card companies have requirements for paying on time in order to keep your 0% APR offer. If you miss payments your 0% balance transfer APR might disappear. A balance transfer offer is one of the most valuable features you can get so make sure you dont lose it. You might also have to pay late payment fees and a penalty interest rate. Set up automatic payments to avoid this.
  • Know When Your Introductory Rate Ends. Your 0% balance transfer introductory rate wont last forever so make a plan to pay off all of your debt or at least as much as possible before the introductory rate ends.
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    Pay Off The Balance In Time

    The special low interest rate on the amount you transfer is called the balance transfer rate. It lasts for a limited time, usually between six months and two years.

    After that, the interest rate goes up. The new rate may be higher than the interest rate on your original credit card. If you havent paid off the whole amount yet, whatever is left will attract this higher interest rate.

    Be realistic about what you can afford to repay in that limited time.

    Work out your monthly repayments to pay off the balance in time.

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    What Is A Good Credit Card Utilization Rate

    Do balance transfers affect your credit score?

    Sometimes called your debt-to-credit ratio, your credit card utilization is the ratio of your overall outstanding balance to your overall credit card limit. For example, if you have a $10,000 limit across your credit cards and your total balances are $5,000 then your credit utilization rate is 50%

    In general, when it comes to your credit score, the lower this ratio the better. Experts generally agree that 30% or lower is ideal, but according to FICO, those with near-perfect credit scores have ultra-low utilizations below 5%.

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    Debt Consolidation Makes You Look Like A More Responsible Borrower

    Using a balance transfer to consolidate your debts can have a positive result. Your debts have now been merged into one easy-to-manage payment at a temporary interest rate of 0%. Your credit history file will reflect this change, and make your approach to credit look more disciplined.

    Rather than rushing into the first balance transfer option that comes along, take your time to compare balance transfer credit cards and find the one most suitable for your situation. You may find one with a longer 0% introductory offer, or a lower annual fee, or some useful complimentary benefits.

    Closing Old Credit Accounts

    The temptation when you transfer a balance across to a new card is to close down any old credit cards. However, one of the factors that make up your credit score is how long youve held certain financial products.

    If you close several cards that you have held for a long time, then you could temporarily impact your credit score. Having said that, if you are worried about managing cards with multiple interest rates, then closing the accounts is still a good idea. Any impact will be temporary and you can rebuild over time.

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    Balance Transfer Myths You Shouldn’t Believe

    Does a Closed Credit Card Hurt Your Credit?

    by Maurie Backman | Sept. 18, 2021

    Many or all of the products here are from our partners. We may earn a commission from offers on this page. Its how we make money. But our editorial integrity ensures our experts opinions arent influenced by compensation. Terms may apply to offers listed on this page.

    Thinking of doing a balance transfer? Don’t buy into these misconceptions.

    can be stressful and costly to pay off. If you owe money on your credit cards, you may be considering a balance transfer, where you move your balances onto a new card with a lower interest rate.

    A balance transfer can be a smart financial move when you’re carrying credit card debt, but it’s important to understand how balance transfers work. Here are four myths about balance transfers you shouldn’t buy into.

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    How A Balance Transfer Can Hurt Your Credit Score

    Every time you add a new credit card to your wallet, it can affect your score. It starts when you apply for the card. The issuer will run a hard inquiry on your report, which can shave off up to five points. The inquiry will stay on your report for two years, but the penalty will fade away in half that time or less.

    Once you get the card, your score will likely experience another temporary dip because your credit score is partly based on the average age of your credit. Going back to the example above, if youve had one card for four years and the other for six years, the average age of your credit is five years. But when you add the new card the average age of your credit goes down to a little over three years.

    The new card also has a potential credit utilization rate problem. Even though your credit utilization ratio is lowered overall, if you transfer all the debt onto one card, your per-card utilization ratio will be high on the new card.

    So, for example, if you were to get the above-mentioned new card, with its $15,000 credit limit, and transfer all $7,000 of your debt onto it, youd have a credit utilization rate of 46 percent on that one card. For some credit agencies, that per-card rate can also be a strike against your credit score. And if your debt was higher or your credit limit on that card lower, your score could really take a hit.

    How To Do A Balance Transfer With Discover

    Balance transfers with Discover can be done by going to your online Discover account and following these steps:

  • There’s a “Manage” option at the top of your account page, and underneath, you’ll find the “Balance Transfers” link.
  • Select a balance transfer offer. Depending on which Discover credit cards you have, there may be multiple balance transfer offers available to you.
  • Fill out the form. Discover will ask you for the balance transfer amount and the credit card number of the card with the balance.
  • Submit the balance transfer.
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