Having multiple credit cards can be overwhelming, especially when you're trying to keep up with all the payments. Balance transfers allow you to transfer all your credit card debt to one new credit card.
How Do Credit Card Balance Transfers Work?
If you have a good-to-excellent credit score, you can take advantage of transferring your credit card debt to one new card and reap the benefits of a lower interest rate and zero interest for a certain period. The amount of debt you can transfer to the new card depends on the credit card company. Be sure to continue to make your monthly payments on your credit cards as the balance transfer may take longer than you anticipate to go through.
Why You Would Do a Credit Card Balance Transfer
When you transfer your card balances you still owe the same amount of money but only have one monthly payment. The money you'll save by doing a balance transfer is in the new lower interest rate. Once you get approved and transfer your balances, you will be responsible for paying the minimum payment each month. However, if you get a deal where you can get 0 percent interest for a certain time, you may want to make more than the minimum monthly payment so you can pay off the entire balance before the interest starts again.
Does a Credit Balance Transfer Hurt Your Credit?
While credit card balance transfers can help you save money, use caution as it can negatively affect your credit score if you apply for multiple credit cards at once. Fifteen percent of your credit score is calculated by the length of time your credit cards have been open. If you keep applying for new credit card accounts, you will bring down the average age of your credit accounts and your credit score may decrease. Additionally, each time you apply for a new account, you can potentially knock down your score by 35 points. Although opening a new account may cause harm to your credit, it can also lead to an improvement because when your total credit limit is higher, it makes your utilization score go down. As long as you don't add anything to your credit cards or close them after the transfer, all of that credit will be available, which is a good thing for a credit score.
What You Need For a Balance Transfer
The information you need when you apply for a credit card account is your name, income, Social Security number and employment information. To transfer your balances to the new credit card, you will need the account numbers for your existing balances and the exact amount you'll need to transfer to your new account.
- Investopedia: How Do Balance Transfers Affect My Credit Score?
- Credit Cards: 9 Things You Should Know About Balance Transfers
- Wallet Hub: What Is a Balance Transfer and How it Works?
- Discover: How Do Credit Card Balance Transfers Work?
- Credit Karma: Will a balance transfer hurt my credit score?
- Nerd Wallet: What Is a Balance Transfer, and Should I Do One?