Reasons not to Transfer Credit Card Balances to other Credit Cards

Credit cards can be useful tools, if they are used correctly. It is advised to either pay off your balance in full each month or as soon as you can to save on interest payments. If you carry a balance and have good credit you may have received offers from other credit card companies to transfer your balance to their credit card. In some instances this could be a good move, but there are some reasons why it would not be a good decision.

Extra fees

Check the fine print for the new account to see if there are fees for the card.  Also, be aware of the introductory time frame. Some cards will offer a lower interest rate for a specific amount of time. If you don’t pay off the transferred balance in the specified time your interest rate may increase, and the increased interest rate will be applied to the balance remaining due.

Damage to your credit score

If you apply for a number of credit cards in a short amount of time, it could affect your credit score. Each time you apply for credit, a “hard” inquiry is generated, which in some cases can lower your credit score by up to 35 points. Just because you have received an offer does not mean you will be qualified for the balance transfer.

One factor in determining your FICO credit score is the length of your credit history. It analyzes the average age of all of your credit accounts. The longer you have been managing credit, the better it will influence your credit score. If you open a number of new accounts, the average age of accounts will decrease, in turn possibly lowering your score.

Don’t close your old accounts.

Even if you do transfer your balance to another card, don’t close your old accounts right away. If your credit report only shows newer accounts it will affect the average age of your accounts and may lower your credit score.

If you transfer you balance to a card with a lower credit limit and close your original account, your credit score may be affected because your credit usage ratio has increased. This means that you have used a larger amount of your available credit, which is one factor that affects your credit score.

It may be beneficial to transfer credit card balances to other credit cards, but there are some reasons not to transfer balances.