Transferring Credit Card Debt May Be Hazardous To Your Financial Health

Credit card companies now make it so easy to transfer one credit card balance to another. We get so bombarded with all the advertisements for balance transfers it’s hard to decide what company to do business with.

Transferring your balance from one card to another is basically the same as consolidating your debt, without actually going through the process of a formal debt consolidation loan. Transferring balances from many accounts to fewer accounts will not necessarily raise your score, because the same total amount is still owed. This may actually lower your credit score, because it could be an indication that you are unable to manage your money and need to transfer your balance to make it easier to pay your debts.

The only reason you should transfer one credit card balance to another card is to save money and reduce your total debt owed. The mistake many people make is by not reading the credit card agreement or credit card disclosure agreement, which is what the credit card companies are hoping for. When you receive your monthly statement, you are shocked to see the new interest rate and can’t seem to understand why your balance has not gone down although you are sending in your monthly payments. It is important to pay off the full balance before the introductory rate special ends. If you charge an item on the new account after the special ends, the interest rate may drastically increase, or it may increase if you make a late payment.

If you are unable to pay off the balance before the introductory rate ends, the balance transfer is not worth it. Here is a balance card transfer calculator that will show how much money you can save with a balance transfer. Do some comparison shopping before selecting a credit card that offers an introductory balance transfer rate. Two good sites to use when comparison shopping are and

If you are not disciplined, you may end up in more debt than you originally owed due to the guidelines of the new low-interest or 0% interest credit card you transferred your old balance to. To pay the new balance off faster you must pay more than the minimum monthly payment; try to pay at least double the minimum monthly payment. The goal is to get out of debt, and the fastest way to get out of debt is to get a lower interest rate and pay more than the minimum monthly payment.

Here are 7 tips to use when considering transferring debt to another credit card.

1. Find out the APR or interest rate of the new card; if the interest rate it too high don’t transfer the debt.

2. Ask if you will be charged a fee for transferring your balance; if there is a charge shop around for another credit card.

3. Find out what the guidelines are for the new card. Don’t get a new card that charges late fees, annual fees or over the limit fees or increases the interest rate if you make a late payment.

4. Find out how long the balance transfer will take and make sure you continue to make payments on the old account until the transfer is complete.

5. Check your monthly statement to verify that your old credit card company is reporting your balance as zero. But don’t be tempted to charge on the old account.

6. Check your monthly statement on your new credit card to verify the balance is reported correctly. If not, write a letter to have your account balance updated.

7. Some companies offer transfer checks that can be used to transfer balances. Be aware that some companies charge a fee for using the transfer checks so keep this in mind when adding up all the fees that can come along with transfer of an old balance to a new credit card.

Closing an account and opening a new account affects your credit score in several ways. Ten percent of your credit score considers new accounts, and your score may decrease as a result of opening the new account. If you decide to close the old account, the account was in good standing and you had the account for several years, closing it could decrease your credit score. Since the total amount owed accounts for 30% of your credit score, your score may increase since the balance you transfer will be reduced by the introductory rate special.

Do your homework before transferring one credit card balance to another credit card. Also, if you know your credit score from each of the three major credit bureaus, call each bureau and ask how transferring your balance to a new card will affect your score. Make a decision to become debt-free and pay your debt off faster by always paying more than the minimum monthly payment. Transferring a balance is relatively easy, but you must do research to determine if the transfer will affect your credit score in a negative way.