The impact of balance transfer on credit scores


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Balance Transfer Cards » The impact of balance transfer on credit scores

The impact of balance transfer on credit scores

The content is accurate at the time of publication and is subject to change.
One can save a lot of money on interest by doing a balance transfer from a card which has a high interest rate to a card which has a low interest rate (at least until the introductory period is over). Most of our mailboxes are flooded with offers from card companies asking us to do balance transfers from high-interest cards to low-interest cards and save a lot of money. This is partly true, especially for those who have huge debts on their cards. However, what one does not know is that doing balance transfers can have a direct bearing on your credit scores as well as your credit ratings. It all depends on the situation and one needs to take a closer look to understand that. For instance, if an individual has a $5,000 debt on the credit card which has offered a credit line of $10,000. Since the debt on the card is half of the credit line that is offered the percentage of debt is at 50%. This is called the "debt percentage". All is well until now as the individual is making timely payments and is happy with the interest rates until there is an offer from another credit card company, which has a fixed interest rate which amounts to half of what the individual is paying at the moment with the present card company. It is natural for the individual to make a comparison of the interest rates that are levied by his current company and the money he could save by doing a balance transfer to a card with a lower interest rate. As of now, the individual`s credit score is good and the new card is obtained within a week, and the balance transfer is done. From this point onwards, it is important to take note of all the latest changes. Firstly, one must be aware of the credit line that is available on the new card. Now the credit score as well as the rating would be entirely dependent on the individual. In case the credit line offered by the new card is lesser than that of the previous card then the debt percentage will be higher and this would in turn lower the credit score. If one has an excellent credit score with their cards, and if they have used the card for more than a couple of years, in that case it makes sense to keep that card, especially if they had a good payment history. If the new cards offer a lower credit line then it is common sense not to increase the debt percentage just for the sake of the credit score and instead one would want to decrease the debt percentage. While trying to keep the credit scores high one must ensure that the debt percentage is kept as low as possible. Even if the revolving credit remains the same it is better to use not more than 25% of the credit line that is offered and avoid using up 50% of the available credit limit. By taking a few simple steps one can ensure that the credit rating is not damaged by doing balance transfers.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Posted: November 8, 2018

Thanksgiving is coming, and whether you are hosting a meal or coming as a guest, your spendings are going to accumulate faster than you can notice. A holiday feast is a costly matter – each year Americans spend around $50 on a Thanksgiving ... Continue reading
The Best Credit Card for Earning Cash: Discover it® Cash Back

The Best Credit Card for Earning Cash: Discover it® Cash Back

Posted: November 2, 2018

You’ll have hundreds of dollars in your pocket in no time because you’ll earn money back on every purchase you make with this card. There are no restrictions on the amount of cash back you can get, and Discover even matches every penny you ... Continue reading
Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Posted: October 10, 2018

Nights are drawing out, the wind is colder every day and you already feel the lightest breath of winter on your face - autumn is here. Holidays are over, kids are back to school and all you are left with are hefty holiday bills that you ... Continue reading
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!