6 reasons to do a credit card balance transfer—and 5 reasons not to (2024)

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6 reasons to do a credit card balance transfer—and 5 reasons not to? ›

Pros of balance transfer credit cards include the potential to save on interest and pay off debt more quickly. But there are cons, which include fees and limited time to repay at low APR. At Experian, one of our priorities is consumer credit and finance education.

Pros of balance transfer credit cards include the potential to save on interest and pay off debt more quickly. But there are cons, which include fees and limited time to repay at low APR. At Experian, one of our priorities is consumer credit and finance education.

A balance transfer lets you move a balance from an existing credit or store card to another card with a different provider. With all of your borrowing in one place, your balances could be easier to manage. Plus, you could receive an introductory or promotional interest rate for a set period of time.

Credit card balance transfers are typically used by consumers who want to save money by moving high-interest credit card debt to another credit card with a lower interest rate. Balance transfer credit card offers typically come with an interest-free introductory period of six to 18 months, though some are longer.

A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.

The catch with a balance transfer credit card is it may not save you money once the 0% introductory period ends because interest will start accumulating on any remaining balance.

After a balance transfer takes place, your old account remains open. The original card issuer will typically only close your account if you make a request for it to do so. Unless you have a good reason to cancel your old credit card, however, you may want to think twice before you close the account.

In some cases, a balance transfer can positively impact your credit scores and help you pay less interest on your debts in the long run. However, repeatedly opening new credit cards and transferring balances to them can damage your credit scores in the long run.

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Pros and cons of balance transfer

Pay less interest each month on what you currently owe – most balance transfers offer a lower interest rate (often 0%) for an introductory period. Some credit card providers offer rewards when you take out a balance transfer card, such as cashback or shopping discounts.

While there are options for balance transfer cards if you have bad credit, they are typically lacking compared to the best cards out there. If your score is in a lower range, you may not qualify for a card with a 0 percent intro APR offer, and if you do, it might not have the best terms.

Closing a credit card after transferring the balance can negatively impact your credit scores by increasing your credit utilization rate. It's best to leave the account open, even if you don't use it very often. At Experian, one of our priorities is consumer credit and finance education.

Balance transfers can help consolidate your debt

Along with personal loans and home equity loans, balance transfers are considered a quintessential debt consolidation tool since they can absorb debt from multiple high-interest cards, giving you fewer accounts to track and less interest to pay.

Yes, a 0% interest balance card may benefit you for a short time, but that 0% APR does not last forever. When the 0% introductory rate period is over, and it always ends, the credit card will revert to its regular APR. This rate might not be low at all. It may actually be higher than you are currently paying.

A Balance Transfer is when you transfer an existing balance on a Credit Card or store card to another Credit Card provider. A Money Transfer is when you use part of your Credit Card credit limit to move cash to a bank account.

The Benefits of a Personal Loan balance transfer:

The first advantage of a Personal Loan balance transfer facility is that the rate of interest is decreased, which in turn lowers the borrower's interest burden through lowered EMIs. Generally, the new lender will offer a lower rate of interest on the loan transfer.

Your old credit card remains active after a balance transfer until you request to cancel it. Depending on how much you transfer, and your card utilization, you may see your credit score drop. Diligently paying the balance and lowering your utilization should help it back up.

By completing a balance transfer, you'll end up paying less interest each month or no interest at all, depending on if your card comes with an introductory 0% APR offer on balance transfers.