Does a balance transfer hurt my credit score? A balance transfer is a debt solution strategy that can really help you if you want to pay off your credit card balances. This is also done if you want to pay off other high-interest debts. This financial method has the potential to save you money by temporarily reducing your interest fees.
Moreso, a balance transfer can lead to really huge savings in interest. However, opening new cards for the purpose of transferring a balance can really affect your credit score, either in a negative or positive way.
Hence, you have to ensure that you really know all the disadvantages and advantages of balance transfer before you engage in one. Also, learn about it before you proceed to open your account.
What is a Balance Transfer?
A balance transfer simply means the act of moving all debt or loans from your existing cards to another credit card account. What most people do is open a new credit card and transfer balances to that card. But you can still carry out the same procedure with an existing credit card you own.
Furthermore, a balance transfer does offer the feature of a lower annual percentage rate (APR) for a limited time frame. This timeframe could be within a year or even longer. One thing you can do is take advantage of a 0% or low-introductory APR balance transfer offer.
This could really help you save some money. During balance transfers, all new interests are usually paused or reduced. This way, you can reduce and pay off your debts at a faster rate.
How Does a Balance Transfer Hurt Your Credit Score?
There are various factors that determine whether or not a balance transfer will hurt your credit score. A balance transfer can either affect your credit score or not, depending on two things. The first is whether you open a new card to transfer a balance, and the second is what you do once your balances have been transferred.
Now, relocating your balances from our existing cards is unlikely to have a significant impact on your credit score. In fact, you are more likely to see a positive effect on your credit score if you transfer your balance to a single new card. Also, there are positive results when you take action to reduce your debt.
However, your credit score can drop if you constantly open new credit cards and transfer balances. Still, you need to know as much information as possible about balance transfers before you move any open balances.
Is Balance Transfer a Good Idea?
If you are entertaining the idea of doing a balance transfer, it should at least be able to save you money. If it doesn’t do just that even in the slightest, there really is no point in doing a balance transfer.
One thing to know is that if you transfer a balance, you are actually just paying off existing debts with a new credit card. It will now cost you less money to keep the debt if you transfer it to a new card with a lower interest rate.
In other words, you can simply allocate more money to paying down the principal accrued on the debt. You won’t be paying interest. However, you should know that a balance transfer doesn’t reduce the total amount of money you owe. It also doesn’t change anything that happened with the previous account.
Will I Need a Certain Credit Score to Be Eligible for a Balance Transfer?
Before there is any chance for your approval, a new credit card company will look at your credit score. That is one factor that will be used to determine your eligibility. However, not every credit card offers a balance transfer. So, before you can open a new card, you need to look at your existing cards for the ones with the lowest APRs. Look out for the ones that offer balance transfers.
Furthermore, if you have a good credit score, you are more likely to qualify for new credit cards. Also, you could qualify for credit cards that offer an introductory 0% APR. If you transfer your balances to a card with a low introductory rate, this allows you to temporarily halt new interests. This way, you work to pay your balances and interest.