How do balance transfer cards work?

Yes, a balance transfer is a good idea if you need months to pay off high-interest debt and you are able to qualify for a 0% balance transfer credit card deal.

What you should know before making a balance transfer:

• 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 balance transfer fee is 2.53%. But, from time to time, there are credit cards that have both 0% APR on balance transfers and no balance transfer fees.
• You should use a 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.

If you’d like to know where you stand before applying for a balance transfer card, check your latest credit score for free on WalletHub.

No, balance transfers do not hurt your credit score directly, though transferring a balance can indirectly lead to credit score damage. When you apply for a balance transfer credit card, for example, 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 allow you to rack up more debt than you can afford to repay. Both of those things can hurt your credit score.

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.

You can use WalletHub’s free credit score simulator tool to get a sense of how a balance transfer might affect your credit score.

How Balance Transfers Can Help or Hurt Your Credit Score

• Credit Inquiries Hurt: 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.
• Lower Account Age Hurts: Adding a new balance transfer card will reduce the overall age of your accounts, which can have a slight negative impact on your score.
• Increased Utilization Hurts: 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.
• Missed Payments Hurt: If you don’t continue to make payments to your original creditor while the balance transfer is being processed, your credit score will suffer. 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.
• Reduced Utilization Helps: 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.
• Low Interest Helps: 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.
• Less Debt Helps: A balance transfer can help you reduce your debt load. That’s important because how much debt you owe is a key ingredient in your credit score. The less, the better, since people with little-to-no debt are in a more stable position financially.

Bottom Line

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 usually takes 14 to 21 days from when you submit a balance transfer credit card application. But depending on the issuer, it could take as few as 3 days or as many as 42. To make a balance transfer take as little time as possible, apply online so the issuer can review your application sooner.… read full answer

How Long a Balance Transfer Takes by Credit Card Company:

While you wait for your balance transfer approval, it is important to keep making payments toward the balance being transferred. You should send these to your original creditor. If you don’t, your balance could be reported as past-due. This might damage your credit standing and put the transfer at risk.

Once the credit card transfer is finalized, you will see a credit listed on your original account. It will look like a payment was made. And your old balance will be listed on your new balance transfer credit card account. Remember, unless you have a 0% transfer card, interest will start to accrue as soon as your balance gets transferred.

For more information, check out WalletHub’s guide on how balance transfers work.