When thinking about transferring the balance from one credit card to another consider what could possibly happen to one’s credit score. It is always extremely tempting to transfer the balance from a credit card to one with a lower rate, even if the rate is only for a few months. However, make sure to consider some things before transferring.
After the balance is transferred do not close down the earlier credit right, but instead just leave it open after transferring the balance. There is a good reason for this, which is that credit score is also dependent upon the history of credit history including the length, and the outstanding amount of debt. By closing any previous credit cards these categories will be negatively affected.
However, do not apply for and accept too many credit cards because this can affect the credit score as well. It does decrease the debt utilization, but it also is a bad thing because having excessive amounts of cards, high credit limit, and too many credit checks will also hurt ones score.
Each credit check can hurt the credit score up to 5 points and only the last 12 months count for the current credit score, so keep that in mind. However, the number of points that are deducted for each credit check is also based on what else is included in the report.
The best idea is if there is an older credit card with sufficient balance left and transfer ability to transfer the money to that credit card instead of getting a new one. This might crank up the debt utilization, but it will keep the length of credit high instead of lowering it like a new one would. Debt utilization is the percentage of the credit extended versus the amount spent on the card.
Before deciding on what credit card to use for the transfer, ensure that all options have been thoroughly checked and all of the fine print has been read and there will be no surprises. Most of all make sure that the fees and terms and conditions have been properly understood. This would ensure that there will be no surprises when the bills come.
The other reason to ensure that all of the terms and conditions are understood is because some credit cards will give an extremely low credit rating at the beginning to get the business, but then at some point jack up the interest rate. This is important to know and be aware of so one can ensure they can afford it.
The game of transferring credit card balances, especially from top credit cards, can be an extremely dangerous game especially if one doesn’t know how to play it. The biggest risk is after the balance has been transferred maxing out the balance of the old card is tempting. Don’t get into this game and one has to be extremely smart about these moves along with a lot of self-control.
One should also consider the cost of the transfer since it does cost to transfer balances between credit card companies. However, one should also take into consideration the costs of not transferring the balance and take a decision based upon what is the best scenario.