Tuesday, March 21, 2023

Do Credit Card Balance Transfers Hurt Your Credit

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Your Credit Cards Journey Is Officially Underway Keep An Eye On Your Inboxwell Be Sending Over Your First Message Soon Why Are Balance Transfers Denied

Do Balance Transfers Hurt My Credit Score? (EXPLAINED)

Generally, there are two scenarios that can keep you from executing a balance transfer successfully:

  • Your application for a balance transfer card is turned down by the card issuer.
  • Your application for a balance transfer card is approved, but when you try to transfer a balance to the new card, the transfer is declined, or the credit limit you were approved for is insufficient to cover the amount you want to transfer.

Heres a closer look at some specific reasons for a balance transfer denial.

What To Do After A Balance Transfer

Moving your balances to one credit card will make it easier to keep track of your debt and make payments on time. Avoiding late payments is perhaps the most important thing you can do to strengthen your credit.

To make sure you’ve got a strong footing when paying off debt, there are other steps you can take once a balance transfer is complete. Follow these guidelines to keep your credit strong:

Debt Consolidation Makes You Look Like A More Responsible Borrower

Using a balance transfer to consolidate your debts can have a positive result. Your debts have now been merged into one easy-to-manage payment at a temporary interest rate of 0%. Your credit history file will reflect this change, and make your approach to credit look more disciplined.

Rather than rushing into the first balance transfer option that comes along, take your time to compare balance transfer credit cards and find the one most suitable for your situation. You may find one with a longer 0% introductory offer, or a lower annual fee, or some useful complimentary benefits.

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Online Or Phone Transfers

The cardholder gives the account information and amount to the credit card company to which they are transferring the balance and that company arranges the transfer of funds to pay off the account.;If, for example, you are paying off a $5,000 balance on your high-interest Wells Fargo Visa card and transferring that balance to a Citi MasterCard with a 0% offer, you would provide Citi with the name, payment address, and account number for your Visa card, and indicate that you want $5,000 paid to that Visa account.

Compare Credit Card Rates And Fees

Do Balance Transfers Hurt Credit?

Balance transfer rate

  • the interest rate on the amount you transfer
  • when it starts
  • how long it lasts

Balance transfer amount

  • how much you can transfer

Purchase rate

  • the interest charged on things you buy
  • if it changes after the transfer period

Interest-free days

  • the number of days you won’t be charged interest on purchases
  • when this starts

Rewards programs

  • the amount you pay every year
  • when it starts

Other fees

  • the transfer to the new credit card
  • late repayments

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How To Do A Balance Transfer

Here are a few steps on how to do a balance transfers:

  • Search for one of the best balance transfer credit cards. Try to find a card with a long enough intro period so that you’ll be able to pay off your debt within that time frame.
  • Open the card and transfer the balance. You’ll need the credit card number of the card with the balance as well as the amount to transfer. Most card issuers let you transfer balances online. So you’ll log in to the account for your balance transfer card and look for the balance transfer option. Alternatively, you can call the credit card company and do the balance transfer by phone.
  • Make your payments. You’re still required to make payments on the original card until the balance transfer is processed. You’ll know that has happened once the original card balance changes. From this point on, you’ll make payments on the balance transfer card.
  • Take Note Of Your Current Credit Card Issuer

    You generally cant transfer debt between cards from the same issuer, so you know which potential cards to immediately eliminate.

    Here are some highly rated 0% APR balance transfer cards:

    • Citi Double Cash Card .
    • Citi Diamond Preferred Card .
    • Citi Rewards Card .
    • Citi Simplicity Card .
    • S. Bank Visa Platinum Card .
    • Citi Diamond Preferred Card .
    • Wells Fargo Platinum Card .
    • BankAmericard .
    • HSBC Gold Mastercard .
    • SunTrust Prime Rewards Credit Card .

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    New Account Opening Aka Time In File

    Another factor that impacts your credit scores is the age of your credit card accounts.

    If your application is approved, youll receive a new credit card and the card issuer will begin reporting the new account on your credit reports.

    Your length of credit history is largely responsible for fifteen percent of your total FICO score. Credit scoring models consider the date each of your credit accounts were opened to determine the age of each account individually and the average age of your accounts in aggregate. You may see a slight drop in your credit scores when you open a new account due to this factor. Yet, as with the inquiry, the credit score impact is typically minor.

    Negative Credit Score Impact: Repeatedly Opening Cards And Transferring Balances

    How Does a Large Balance Transfer Affect My Credit Score? – Credit Card Insider

    Balance transfers will hurt your credit score if you make a habit of opening new credit cards and repeatedly transferring balances between them.

    This approach seems enticing: why not just avoid paying interest for as long as you can by transferring your balances again and again?

    But cycling through new cards is bad for your long-term financial health. Constantly opening new credit cards results in many hard inquiries and reduces your average account ageand could hurt your credit.

    If you continue to roll your balances into new cards, your credit score could eventually be lowered to the point that you won’t qualify for any new credit . Not only that, your balance transfer fees could add up over time, minimizing the savings you get by reducing your interest rates.

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    What Is A Balance Transfer Credit Card

    Feeling frustrated and overwhelmed by credit-card debt? You arent alone. According to a Bankrate survey, 30% of American households have more credit-card debt than money in savings. With the average annual percentage rate for credit cards at more than 16%, consumers are squander big money paying interest.

    Balance transfer credit cards are a common way for consumers to deal with credit card debt more efficiently.

    What is a balance transfer card? Its essentially transferring your credit card debt to another card with zero percent rates that allow you to whittle down the debt without paying interest during an introductory APR period. Every dollar goes toward reducing the balance and not spinning your wheels with large interest so you get out of debt more quickly.

    Key point: This isnt a way for you to use another card to buy more stuff. Its about getting rid of the debt you already have.

    Its one of the ways to effectively refinance credit card debt. Youll find that any measure to consolidate debt will allow you to stretch your finances.

    Even with a balance transfer fee of 3%-5% on every balance transferred to the new card, it can still be an effective method of escaping from debt and also boosting your credit score.

    We know you have questions. How do balance transfer cards work? How do you do a balance transfer? Do balance transfers hurt your credit? Can I cancel a balance transfer? And, of course, should I do a balance transfer?

    How To Increase Your Balance Transfer Approval Odds

    If youre interested in getting a balance transfer, youll need good credit to do it, as offers have become more competitive.

    These tips can help as you prepare to apply for a balance transfer card.

    • Fix credit reporting errors. Credit report errors are not uncommon, and they can damage your credit. If you spot a mistake on yours, file disputes with the three major credit bureaus Equifax, Experian and TransUnion.
    • Know the issuer. If you have a card or two in mind for a balance transfer, scout out the card issuers transfer policies. You dont want to waste time applying for a balance transfer if its likely to be denied because you already have a card with that bank or because the amount you want to transfer is more than the credit card company allows.
    • Review your credit limit. Make sure your card has enough room to accommodate a balance transfer.
    • Toe the line with your existing credit accounts. If your score isnt quite what it needs to be to get approved for a balance transfer, work on doing what you can to improve it. Make at least the minimum payments on time, says Dvorkin, and focus on paying down some of your credit card debt to improve your credit utilization.
    • Carefully consider how additional applications will affect your credit. If you apply for too many credit cards within a short time frame, you could damage your score via multiple hard inquiries. And a flurry of card applications could send a signal to prospective lenders that youre too reliant on credit.

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    Number Of Accounts With Balances

    Theres another potential way a new balance transfer card might improve your credit scores as well. If you open a new credit card and transfer outstanding balances away from several existing credit card accounts at once, you may lower the number of accounts with balances that show up on your credit reports.

    FICO scoring models consider the number of accounts with balances on your credit reports the fewer, the better. When several of your existing accounts are updated to show $0 balances, your credit scores may benefit. Again, just make sure not to close your original credit cards after theyre paid off or you could risk damaging your scores by accident.

    How To Compare Balance Transfer Credit Cards

    Do Balance Transfers Hurt Your Credit?

    Comparing credit cards is all about saving the most money, and choosing one of the best balance transfer credit cards can save you big.

    Here are the steps to compare balance transfer offers:

  • Check the length of the offers. Most of the best credit card balance transfer deals have 0% intro APRs, so you can compare them by how long their intro offers last. If you need as much time as possible to pay off debt, pick the card with the longest 0% intro APR.
  • See which cards have balance transfer fees. Free balance transfer credit cards help you avoid extra fees, but they may not have the longest 0% intro offers. You’ll need to calculate whether you’ll pay less with a longer intro offer or by not paying balance transfer fees.
  • Use other features as a tiebreaker. You may find that multiple balance transfer credit cards are dead even. In that case, you can choose one based on other features the cards offer, such as cash rewards or a welcome bonus. For example, the Citi® Double Cash Card â 18 month BT offer is one of the best balance transfer credit cards and one of the best cash rewards credit cards.
  • Avoiding other fees, such as an annual fee or late fee, is also smart. The Citi Simplicity® Card card doesn’t charge a late fee, although you should avoid making late payments as you can lose your 0% intro APR offer. None of the cards on this list charge an annual fee. You should avoid cards with an annual fee, as it can eat into any savings you get from the introductory APR.

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    Is There A Limit To How Much You Can Transfer

    You can never transfer a balance that’s larger than your credit limit. Some balance transfer credit cards will only let you transfer up to a percentage of your credit limit — usually 70% to 95% — while others will let you reach your credit limit. Keep in mind that any balance transfer fees will add to your balance as well. If you’re transferring a $1,000 balance to a card with a 3% balance transfer fee, you’ll need a credit limit big enough to cover a $1,030 balance.

    How Balance Transfer Credit Cards Work

    Balance transfer cards allow you to transfer over existing credit card balances from other credit cards to your new card. Do the math to verify that the offer is worth any fees incurred.

    Once youre approved for your balance transfer card, you are ready to transfer a credit card balance. Heres how the process works:

    Request a transfer

    Contact your new credit card issuer to request to transfer over an existing balance from another card. You can do that by calling the customer service number on the back of your card. Your card issuer may allow you to request transfers online or through its mobile app too. You will be asked for specific information about the debt you are transferring, like the account number and balance amount. Depending on card limits, you could get approved for transferring all or a portion of the existing balance.

    Continue making payments on the old card

    Balance transfers take time to be approved and processed. The process can potentially take weeks to be finalized. Continue to make minimum payments on your old card until the balance has been moved to the new card. Failure to make payments on the old card before that time could result in costly late payments.

    Plan your debt payoff

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    Is A Balance Transfer Good Idea

    A balance transfer allows you to move an existing balance from one or more credit cards to a single card usually one with a low or 0% introductory interest rate. But there are pros and cons to balance transfers.

    Your level of debt wont change, but the main benefit is this: During a;0% interest introductory period, your debt wont grow with interest charges while you work to get it under control.

    The best balance transfer credit cards typically offer a 0% intro annual percentage rate for a specified period, usually 12 to 21 months.

    Lets look at an example of how this works. Say you have the following cards in your wallet:

    36 months 0 months

    Youre motivated, so you want to pay off the balances on Cards 1, 2 and 3 in the next 12 months. Transferring those balances onto Card 4, which has a 0% intro APR for the first 12 months, could save you up to $665 in interest.

    Just dont forget to factor in the balance transfer fee when calculating your net savings. Balance transfer fees are typically 3% of the amount you wish to transfer.

    You can use this balance transfer calculator to help you run scenarios to decide if a balance transfer card makes sense for you.

    Positive Credit Score Impact: Balance Transfers To One New Card And Paying Down The Balance

    Do balance transfers affect your credit score?

    Balance transfers can have positive credit score effects if you open a single new card with a low APR and make an effort to reduce your debt.

    When you open a new card for the purpose of transferring a balance, you will increase the amount of credit you have available and thus lower your credit utilization ratio. Credit utilization is a major factor in both the VantageScore® and FICO® credit scoring models.

    Opening a new card could cause a hard inquiry or credit check on your credit report, which could have a negative impact against your credit score. However, opening a new line of credit could improve your utilization rate by increasing your available credit limits.

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    Balance Transfers And Your Credit Score: Weigh All Of The Factors

    If you use a balance transfer to make on-time debt payments and reduce your overall balance, your credit score can increase. Still, applying for multiple balance-transfer cardsor adding to the utilization on one of your existing cardscan potentially lower your score. Employ balance transfers intelligently to maximize their impact on your credit.

    Mistake : Forgetting About The Last Payment On Old Cards

    Just because youre moving toward a balance transfer, it doesnt mean you should ignore your old cards. If you do, in fact, it could mean trouble.

    While waiting for the balance transfer to take affect remember, it might require a few weeks your old cards could be creeping up on their due dates. You are risking getting slapped with late fees.

    And that could mean your new balance could exceed your balance transfer credit card limit. So, youll need to ratchet down the debt before attempting another transfer and that might lead to missing the transfer deadline .

    Even if you transfer the debt without exceeding your limit, missing payments will still cost you money. And it will send your credit score downward.

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    What Happens When You Open A Balance Transfer Credit Card

    When you open a new credit card in order to transfer a balance from an older card, its what happens before and after the balance transfer that impact your credit most. To take advantage of a zero percent interest balance transfer, you must first qualify for the offer. In order to qualify, you have to apply.

    Insider tip

    Not sure if youll qualify for a particular credit card? Learn how to see if youre pre-qualified for any credit cards before you apply, without hurting your credit scores.

    Who Should Consider A Balance Transfer

    How Does a Balance Transfer Affect Your Credit Score ...

    Balance transfers are best for individuals with high-interest debt who have good enough credit to qualify for a 0% interest balance transfer card. They are also great for those who need extended time to pay off their balance.

    A balance transfer might not be the best option for individuals with low balances on existing cards or those with poor credit. Avoid balance transfers if you have no intention of paying off your balance.

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