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How Balance Transfers Work: Do Balance Transfers Hurt Your Credit?

Many people wonder how balance transfers work and if balance transfers hurt their credit score. Balance transfers are a good idea when they can save you money. 

They may be a good option for you if you have credit card debt with a high Annual Percentage Rate (APR) — transferring your debt to a card with lower or 0% introductory APR can save you from paying hundreds, or thousands of dollars in interest.

Let’s review how balance transfers work, and if they hurt your credit score:

How credit card balance transfers work

Balance transfers are for people who want to save money by reducing their interest payments over time. You save money by transferring high-interest credit card debt to another credit card that has a lower interest rate.

A typical credit card will have transfer fees associated with transferring a balance. But some credit cards offer introductory rates that allow you to temporarily circumvent transfer fees and interest.

In order to take advantage of a balance transfer credit card, you’ll need to adhere to the issuer’s cardholder agreement and understand the fine print.

Good credit cards for balance transfers

Generally speaking, if you qualify based on your credit score, some of the best credit cards for balance transfers have the following criteria:

  • Intro (Purchases): 0% Intro Annual Percentage Rate (APR) on Purchases (ex. for 12 months)
  • Intro (Transfers): 0% Intro Annual Percentage Rate (APR) on Balance Transfers (ex. for 12 months)
  • Annual Fee: $0

What does this mean for you? If you have a credit card balance with a high APR, you can transfer your balance to a card with no fee, and you have 12 interest-free months to pay your balance down.

Explore good balance transfer cards here, or you can sign up for Money Sensei to get custom balance transfer credit card recommendations based on your unique financial profile.

Pro tip for choosing a good balance transfer credit card:

Find a balance transfer card with additional benefits and perks, like one that offers rewards, cash back, travel bonuses, discounts, or signing bonuses. That way, you’re getting an extra benefit from opening a new line of credit, and the credit card has some additional use and value to you after you pay off your credit card debt.

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Important: Make sure you pay off your credit card debt before the introductory period ends! If you don’t pay off your balance by the end of the intro period, you’ll pay interest on the entire starting balance — regardless of how much you paid down your balance.

Frequently Asked Questions

Can I keep transferring credit card balances?

Yes, you can. Keep in mind that applying for a new credit card, and opening a new credit card, can have negative impacts on your credit, or even affect your ability to open a new credit card.

Watch: How to Avoid Paying Interest on Credit Cards | Interest Hack

For example, if you want to get approved for a Chase credit card, they have a policy that says you can’t have opened five or more personal credit cards in the previous 24 months.

Each credit card you apply for will also result in a “hard inquiry” on your credit report. A hard inquiry will affect your credit score by 5-10 points on average, depending on your credit history. FICO states that they only consider hard credit inquiries in the last 12 months to calculate your credit score, but they could remain on your credit report for up to two years.

Do balance transfers hurt your credit score?

A balance transfer could hurt your credit score due to the act of opening a new line of credit — a hard inquiry could temporarily drop your credit score based on how many you’ve had in the last 12 months.

But transferring your credit card debt to a new balance transfer credit card will not affect your credit. By paying off your debt, your credit score will increase, as your credit utilization ratio will improve, and your available credit will go back up to your starting credit limit.

Abigail Masterson

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