
What Is a Balance Transfer and Will It Help My Credit?
It’s possible that you weren’t quite sure what a balance transfer was or how to conduct one before you found yourself in a position where you were in need of one. Now that you’re looking into the process, it’s vital to clarify what exactly it is that you are about to do. Let’s explore what it means to conduct a balance transfer as well as how it might affect your FICO score.
What is a Balance Transfer?
Put very simply, a balance transfer is just as it sounds: it is a transfer of debt from one credit card to another credit card. A balance transfer is usually done to move your debt to a credit card with a lower interest rate. A balance transfer does not cancel out your debt and it does not reduce the amount of interest that has already accrued on your debts. While a balance transfer can increase your savings, it’s good to remember that you may have to pay a fee in order to transfer your balance.
Can a Balance Transfer Help My Credit?
A balance transfer can help your credit score, but will probably only result in slim to moderate gains. Some factors that will affect how your credit score will be affected by a balance transfer include:
- The amount transferred (including interest incurred on your previous card)
- Your new available credit limit
- If you close a credit card account
The benefits to conducting a balance transfer are primarily financial. Transferring your debt from one credit card to another is useful because it can help you to pay off your debt more efficiently. A transfer of debt from one credit card to another has very little impact in the short term. In the long run, however, transferring your balance can improve your credit score because theoretically it will allow you an improved way to pay off your debts.
A balance transfer can be the first step to financial health. Once you have transferred your balance, it is crucial to make your payments on time and pay off your debt as soon as you are able.
