Does paying your debts with balance transfer affect your credit score?


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By Contributing Author

A balance transfer is when you transfer your outstanding debt balance from a higher interest rate credit card to a new lower rate credit card. This action will benefit the cardholder by having fewer penalties and more reward points or travel miles.

Most credit card companies offer their cardholders a free balance transfer. It has become rare nowadays, but it is still existing. It only depends on the regulation of your credit card company.

How Does Balance Transfer Works

This option may help you lighten the burden of the weight of your debt. It will help you pay off your balance quickly since it will be transferred to a new card and will have a lower interest rate.

When you acquire a new credit card, you become eligible for a bank balance transfer, but then again, it depends on the credit card provider.

It is best if you start the process sooner, you will need to know the account number of your current balance. You will also need to determine how much you will transfer to your new credit line. Some providers may approve a full amount transfer, but most will only allow you to move a part of your balance.

The amount you are allowed to transfer will depend on the credit limit of the new credit card. Once your balance is successfully transferred to your new card, you can start paying your new creditor. Your new card may charge you a balance transfer fee, this usually ranges between 3% to 5% of your transferred balance and will be added to your new balance.

Now you have to study this information and carefully think if pushing through with this option will benefit you financially. Or it will just push you off the drain even more. Take note that you cannot transfer a balance into a card under the same institution. You can transfer it into an old or new card from another credit card company.

The Impact To Your Credit Score

If you are hesitating to pursue this option because you think it will affect your credit score, well, it will. It does have an impact on your credit score, but the question is, will it be a good or bad effect?

The answer is, it depends.

Whether it will affect your score positively or negatively, it depends on several circumstances. It will hurt your credit score if you apply for different cards with low introductory rates. The period of your opened credit accounts will affect a certain percentage of your credit score. The longer your accounts are open, the higher your score will be.

Every time you apply for credit, a hard inquiry will be required by the provider. And each hard inquiry will get five to ten points off your credit score. If you want to keep your credit score in a good position, then you should do your research and only apply for one credit card.

Opting for a balance transfer can give you a better debt condition. Along with the transfer come the adjustments of your score. Having a new card will make your credit utilization decrease that will have a positive impact on your score.

The Things You Need to Know

You have to remember that you cannot transfer all of your balance into your new card if your balance is still high. You have to decide whether to transfer a part of it or apply for several cards.

It is also crucial that you have a good plan on how to repay your debt. You have to plan according to the cards zero percent or low introductory APR. You have to take advantage of it, or else you will only go back to square one.

Most banks have a required minimum credit score when applying for a balance transfer. Though there are still institutions that offer a balance transfer for individuals that have bad credit, it is always best if you have an excellent credit score. By having a high score, you can take advantage of all the best offers you can get.

Have you ever thought about why you came into a decision where you acquired a debt? You have to take that thought into account. Think of why you have debts in the first place. Because if you don’t recognize the reason, you may just end up into a bigger problem regarding your debts.


A balance transfer may be the best resort a debtor can do to ease the weight of their debts and settle them. But before entering into another agreement or situation, it’s important that you identify the advantages and disadvantages of their decisions. Weigh your options carefully, because once you go into that path, there will be no going back.