Will a Balance Transfer Affect my Credit?

balance transfer

Millions of Americans are currently carrying a collective credit card debt of roughly $905 billion. With the average interest rate of credit cards continuing to hover around 16 percent, it’s safe to assume that many of us would love the chance to pay off some of that debt at a lower interest rate.

Some of those same people were likely thrilled to learn about balance transfers, or transferring the debt from one credit card to another credit card. This is done by opening a new credit card and informing the issuers of that card that you intend to transfer your previous balance. Usually these cards are attractive to people because they promise a lower interest rate for a certain period of time. However, be warned: transferring your balance is not the same as paying off your card. You are still liable for the entire balance, regardless of which credit card you are using.

While this arrangement might seem like a no-brainer, there are several factors to consider before applying for a balance transfer card.

Current credit score

Your credit score has an impact on every financial aspect of your life and could even affect your ability to gain employment as more and more employers utilize credit checks to determine how reliable you are as a person.

If you have a decent credit score, and you apply for a new credit card, you’ll likely get all the credit you need, or at least most of it. For example, if you have $8,000 of debt to transfer, and you have good credit, you will likely get approved for an $8,000 limit provided your debt-to-income ratio isn’t too high.

However, if you’re unable to get approved for the total amount you need, you may be doubling your problems by only transferring a portion of your credit card debt. While you might end up paying less in fees and interest on the original card, having two credit card payments where you used to have just one can be stressful for some.

Debt-to-income ratio

With that in mind, another factor that comes into play when applying for a credit card is your income compared with how much debt you already have. Most lenders or credit card companies want you to spend less than 40% of your monthly income on debt repayment, including your mortgage, car loan, any personal loans you may have, and credit card debt. (In reality, this number should be much lower in order to really stay on track with your spending, saving, and credit repair or maintenance.)

One of the most important things to consider is whether or not you can afford to make the monthly payments necessary to pay off your balance before the end of the introductory period. Not doing so can wreak havoc on your finances.

Not paying off your balance within the introductory period

If you do wind up being approved for the amount you need, you’ll want to consider the introductory period. Whether the initial interest rate is zero percent or as much as five percent, it’s wise to calculate how much you can afford to pay monthly, and if you can accomplish paying off this debt within the allotted time period.

If you can’t, things can get complicated and expensive very quickly. While credit card agreements can vary, it’s important to read them thoroughly. Many balance transfers restrict balance payment to the introductory period, so you may be liable for interest for the entire amount of the transfer, and not just the remaining balance.


Nothing comes for free, and that’s especially true of credit cards. While a low interest rate may draw you in initially, the fees associated could be the difference between paying off your credit card on time, or getting further into debt. When doing research on the best balance transfer card for you, always check the fees and ensure you can afford them. Be on the lookout for annual fees, introductory fees, balances transfer fees, and more. These can add up to hundreds of dollars, and may not be worth paying in the long run, especially if you’re only transferring a small balance (under $1,000).

It would be a shame not to be able to pay off your balance transfer on time because of fees, resulting in a chargeback of interest. Reading the fine print on any credit card agreement can save you thousands.

When not to transfer your balance

Balances transfers are designed for those with good credit who simply wish to pay off their debts with a lower interest rates. Using a balance transfer to help you avoid sinking into worse debt isn’t worth it, according to experts. The best thing to do in this type of situation is to work hard to pay down your existing debt as much as possible before exploring the idea of opening new lines of credit.

Additionally, if you have poor credit, you may not qualify for a balance transfer to begin with. In these cases, a personal loan or debt consolidation loan might be a better choice for your financial situation and lifestyle.

Things to remember

At the end of the day, if you do sign up for a balance transfer, you’ll want to do the following first:

  • Calculate how much you can afford to pay monthly
  • Check your credit
  • Research the card that best suits your needs
  • Pay it off as quickly as possible

A balance transfer does tend to have an affect on your credit score, but it all depends heavily on your current credit situation. To find out if a balance transfer could benefit your credit, contact Lexington Law at 844-259-3482.

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