Does a balance transfer cancel a credit card?

When you transfer balances on credit cards, what happens is that the new credit card’s issuer pays your original creditor for the amount transferred. Once the balance is transferred, you will owe your debt to the issuer of the balance transfer card. You can transfer most types of debt to credit cards, including balances from car loans, student loans, HELOCs, mortgages, and other credit cards. Not all issuers allow all types of transfers, though. Plus, the amount you transfer cannot exceed your new card’s balance transfer limit, which may or may not be the same as the overall credit limit.… read full answer

People usually transfer a balance on a credit card to take advantage of lower interest rates, especially 0% APR transfer offers. These give you a certain number of months after account opening to repay your balance without interest. However, transferring a balance usually involves a fee: 3% to 5% of the amount transferred is the norm.

Here’s what happens when you transfer a balance on a credit card:

1. The card issuer transfers funds: Once your transfer application is accepted, the card issuer will typically send a check to the old credit card or loan issuer.
2. The debt moves to a new issuer: You now no longer owe the balance to your old creditor. Instead, you owe it to the issuer of the balance transfer card. Ideally, the card should have a lower APR.
3. The card issuer charges monthly payments: Your monthly statement will tell you the minimum you must pay to keep your account in good standing, but it’s best to pay off as much as you can each month. Try to pay off your entire balance by the end of any 0% intro period, or you’ll owe interest.
4. Interest accrues: Ideally, your balance transfer card will have a long 0% interest period. But once that period ends, you will owe interest at the card’s regular APR on any balance that remains. Interest compounds daily.

When selecting a balance transfer credit card, look for an APR that will lower the overall cost to repay your debt. Consider any introductory rate and how long it will last, along with the regular APR, how long it will take you to pay what you owe, and the fees involved.

If you’re transferring multiple debts, be aware that each may incur its own transfer fee. You should also be sure to check your credit score and only apply for a card with good odds of approval. Applying for a new card will make your credit score dip temporarily.

Once you request a balance transfer, remember to keep making payments on your old loan or credit card while your transfer processes, so that you aren’t marked as late.

When you transfer balances on credit cards, your goal should be to save money while getting debt-free sooner. There may be fees, and applying for new cards gives your credit rating a small hit. But in the long run, the potential to pay off your debt faster can help your score and your wallet overall.

Balance transfers don’t hurt your credit score directly, but transferring a balance can indirectly cause credit score damage. When you apply for a balance transfer credit card, it will generate a hard inquiry on your credit report, causing a slight dip in your credit score. If you transfer a balance to an existing credit card account, however, there is no hard inquiry and no credit score damage. A balance transfer could still result in high credit utilization, though, and even allow you to rack up more debt than you can afford, if you’re not careful. Both of those things can hurt your credit score.… read full answer

So, the act of transferring a balance itself won’t affect your credit, but it will indirectly alter several key components of your credit profile, from utilization to the age of your accounts. These changes might lower your score a bit in the short term. But over time, interest savings and the ability to pay off your debt faster should make transferring a balance a net positive for your credit score.

How Balance Transfers Can Help or Hurt Your Credit Score

• Balance transfers can take up to three weeks, or be completed in just a few days, after you make a request or apply for a card. Transfers to new accounts may take longer than existing accounts. Continue making payments on your original account in the meantime to avoid hurting your credit score.
• If you apply for a new balance transfer card, the resulting hard inquiry will likely cause a slight dip in your credit score for up to 12 months.
• Adding a new balance transfer card will reduce the overall age of your accounts, which can have a slight negative impact on your score.
• Keep an eye on how the transfer affects your account’s credit utilization. Making a transfer will usually add 3%-5% to your debt due to balance transfer fees. If your utilization is over 30% of your credit limit, that’s not good for your score.
• If you leave your old credit card(s) open, adding a new card will reduce your utilization ratio across all accounts, assuming no additional spending. The utilization on the card you transferred the balance from will drop, and it will increase on the card you transferred the debt to.
• Balance transfer cards often have 0% introductory APRs. This gives you the chance to pay off your balance faster, since the full amount of your payments will go to the principal rather than interest. This is good for your score long-term.

Balance transfers won’t hurt your credit by themselves. But they affect other elements of your credit that could bring your score down a little temporarily. Still, the benefits will outweigh the negatives in the long run, as long as you plan to repay most, if not all, of your balance during your card’s low introductory APR period.

Where people get into trouble is trying to use a balance transfer to support unsustainable spending habits, thinking 0% balance transfer credit card offers are always available. They’re not, and learning that the hard way is a very expensive mistake. So make sure to use a balance transfer calculator to make a payment plan.

A balance transfer is a good idea if it will save you money, and that is most likely if you have good or excellent credit and you make an affordable payment plan prior to applying. You generally need good credit or better to get a 0% balance transfer credit card. Most balance transfer cards have very high regular APRs, making it important to repay what you owe before the 0% period ends.… read full answer

You’ll also want to make sure the new card’s balance transfer fee is as low as possible. The average fee is just under 3%. But, from time to time, there are credit cards that have both 0% APR on balance transfers and no balance transfer fee.

You can use WalletHub’s balance transfer calculator to compare the cost of repaying what you owe with your current card versus taking advantage of the best balance transfer offers. You can also check your latest credit score for free on WalletHub, the only site with free daily updates.