Is it worth doing a 0% balance transfer?

Yes, it is worth it to transfer a balance if you can get a lower interest rate in the process, as that will save you money and help you pay off the debt sooner. For example, transferring a balance with a high APR to a 0% balance transfer credit card could save you a lot of money even if the card has a balance transfer fee.... read full answer

A lot depends on the card you’re able to qualify for, how much you owe, and how much you can afford to pay per month. Fortunately, you can use a balance transfer calculator to put it all together and see how much money a balance transfer could save you. You can also consult the list below to confirm whether each item is true in your situation.

It's Worth Transferring a Balance If:

• You are transferring the balance to a credit card with a lower interest rate.
• You would pay less in combined interest and fees than you are paying currently.
• You need more time to pay off your balance.
• You have good or excellent credit (typically needed to qualify for a 0% APR balance transfer credit card).
• You plan on paying off the balance before the end of the 0% or low APR introductory period.

If you do decide a balance transfer is worth it for you, there are many great balance transfer credit cards that offer 0% introductory rates and even some that offer no balance transfer fees as well. Check out WalletHub’s editors’ picks for the best balance transfer credit cards to find the right one for you.

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.