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Question 1

Do balance transfers hurt your credit?

Accepted Answer

It all depends on how you work the balance transfer. If you use the balance transfer to pay off existing outstanding credit lines, but don’t increase the balances on the paid off card(s), there should be no impact on your credit score. After all, you’re simply moving debt from one credit card to another.

However, if you transfer a balance from one card, and begin using the old card to make additional purchases, your credit score can suffer. That’s because not only will your overall amount of credit outstanding increase, but you’ll also be carrying balances on two (or more) cards instead of one.

Question 2

Should you max out a balance transfer credit card?

Accepted Answer

You’ll need to step lightly here. If you max out the balance transfer card, it could have a negative impact on your credit utilization ratio. It’s probably best to use no more than 80% of the amount of the balance transfer credit line.

But again, if you’re simply moving debt from one credit card to another, the impact – if any – should be minimal. However, if you continue to charge on the card you transfer the balance from, you’ll be increasing the amount you owe on your cards, overall. That will drop your credit score.

Question 3

Can a balance transfer be denied?

Accepted Answer

Yes, and there are several circumstances where that can occur:

- The balance you want to transfer exceeds your credit limit, or the balance transfer limit on the card.

- The credit card issuer modifies the terms of your credit card, either reducing the allowable balance transfer amount, or eliminating it completely.

- Your intention is to use the balance transfer on one card to pay off the balance on another card with the same issuer.

- Your credit score has fallen. Credit card issuers periodically monitor your credit score. If it falls below a certain level, your balance transfer privilege can be reduced or revoked.

It’s always good practice to contact the credit card issuer before making a balance transfer to confirm it will be accepted. That’s even more important if you want to do a balance transfer on a card you’ve owned for a while, but either haven’t used it in a while or haven’t used it for a balance transfer.

Question 4

When is it a good idea to get a balance transfer credit card?

Accepted Answer

A balance transfer card makes most sense when you’re serious about reducing or eliminating your credit card debt. Since interest on credit cards is notoriously high (commonly greater than 20%), eliminating that interest charge will provide an opportunity to concentrate on reducing or eliminating credit card principal.

If you merely take a balance transfer card to lower your interest costs, the benefit will only be temporary. Once the standard rate on a balance transfer card kicks in, you’ll be right back where you started.

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