To choose the right balance transfer credit card, compare your existing credit card’s APR with each prospective card’s balance transfer APR, balance transfer fee, and regular APR to see which card makes your debt cheapest to pay off in the end. The point of a balance transfer is to save money while paying off a debt. So if you find a balance transfer card with a $0 balance transfer fee and a 0% APR period on balance transfers that’s long enough for you to pay off the entire transfer without interest, you may have found the best option. But there are some caveats to keep in mind while you compare balance transfer credit cards.
Tips for finding the right balance transfer credit card:
Check your credit before you shop. Most balance transfer credit cards require at least good credit. It’s no fun to find the right credit card just to find out that you don’t qualify for it. So check your credit score for free before you find the right credit card.
Calculate how much your debt costs on your current card. It’s important to know how much your debt would cost if you didn’t transfer the balance. That way, you’ll know how much money you stand to save in the same timeframe with a balance transfer. Using a credit card payoff calculator will help.
Calculate how much a balance transfer will cost on each prospective card. The costs associated with a balance transfer include the balance transfer fee and the promotional APR (if it’s not 0%). Most balance transfer credit cards have a transfer fee, but some don’t. The card’s regular APR also is an important consideration, especially if you might not repay the full balance within the card’s low interest introductory period.
Know how long of an intro APR period you’ll need to pay off the debt. How much can you feasibly pay every month? It’s important to be realistic about this, because most balance transfer credit cards have high regular APRs after the intro period ends. Use a balance transfer calculator to figure out how much you’d need to pay each month.
See if the balance transfer card lists a minimum credit limit. You won’t know how big the new card’s credit limit will be until you get approved for it. So it’s possible you may not be able to transfer your entire balance to the new card. That’s a big caveat. Some credit cards give a minimum credit limit in the card’s terms, so check to see if your best balance transfer option lists a minimum limit. You can also do partial balance transfers.
Overall, the best balance transfer deals have a year or more of 0% APR on balance transfers, no balance transfer fee and no annual fee. Balance transfer credit cards relieve the burden of interest for a while, which makes a big debt easier to pay off. Keep these tips in mind when you’re shopping and you’ll be well on the road to choosing the right balance transfer credit card for your situation.
Balance transfers don’t hurt your credit, 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.… read full answer
Balance transfers don’t hurt your credit score directly. But 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 as a result. 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.
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.
Here is how a balance transfer could hurt or help your credit:
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 you have good or excellent credit and make an affordable payment plan prior to applying. You generally need good credit or better to get a 0% balance transfer credit card, though these introductory periods are temporary. 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.
A balance transfer does not cancel a credit card. You are not required to close the account once a balance transfer is complete, either. It may actually be a good idea to keep your old credit card account open, even if you don’t plan on using it. Closing a credit card account after a balance transfer could have a negative effect on your credit score.… read full answer
When you close a credit card, it reduces your total available credit and drives up your utilization ratio. It’s best to maintain a debt level of less than 30 percent of your total credit limit. Also, the average age of your accounts may decrease, particularly if you close a card that you’ve had for a long time. Potential lenders like to see a lengthy history of credit accounts when reviewing applications for additional credit.
The exception to the rule, when it comes to cancelling a credit card after a balance transfer, is if the card has an annual fee. You could pay the fee once a year to keep the card active. Or, if you don’t plan on using the card anymore, you may consider closing the account to save money.
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