Transferring Credit Card Balances Back and Forth

Is switching balances back and forth on cards going to do anything to my credit score?

I have 3 main credit cards that I use. I have $0 balance on two of them and the 3rd I have $2400. I did a balance transfer in December from the 2nd card to the 3rd card because there would be 0% interest for 12 months. I just got emailed an offer to transfer any balance to the 2nd card by June for 0% interest for 12 months.

I’m wondering if switching back and forth would do anything to my credit score. The fee for the transfer is 3% or $72. The limit on the 2nd card is 3,000 and the 3rd is 5,000. The APR after 12 months is 22.99 and 15.99 respectively. I regularly pay $100 a month (more than the minimum) to try to pay off this balance as soon as possible and an overtime money I earn, I throw into it. I just wanted to clarify if this is a good financial decision to clear up debt.

  1. This will not change your credit score but only transfer the amount you won’t be able to pay off by December to minimize the transfer fee and do it near the end of the offer to give yourself more time with the 0% on the 2nd card.

  2. The problem is, you are NOT clearing up debt.

    Repeat after me, you are NOT clearing up debt. You are merely transferring it around. The only way to clear up debt, is to pay down the full amount of your balance.

    No it will not hurt your credit score hugely, if you’re not opening new accounts that lower your average account age. Likewise if you’re not adding to your credit utilization. But you must have a plan to pay it ALL off eventually, and definitely before the 0% interest promotional period expires.

    Balance transfers make sense to address short term cash flow problems. For example, a couple years ago I had a cross country move to make, and incurred ~$8K worth of moving and furniture expenses. I had about $2-$3k in savings, but I was starting a new $80k/yr salary job. So, a balance transfer made sense for me (it helped that I had great credit and had a high enough limit to allow an $8k, 0% interest, 3% fee 12 month transfer). I couldn’t pay all $8k up front, but I could easily pay it off over the course of 12 months, and 3% was a decent price for what was essentially just a short term loan for me (personal loans that I’ve seen are usually 5-10%).

  3. Any organization you authorize to see your credit can look at your credit and debt IN TOTALITY. So it doesn’t matter if you have that spread into 10 piles on 10 different cards or scooped up all in one giant card. They look at all debt.
  4. You don’t necessarily need to worry about the APR if you’re planning to do transfers, but read your fine print. Are you capped at a percentage of your available credit that you can transfer?

    $2400 over 12 months is $200 per month. Can you find a way to double your payment and avoid this issue all together?

    For your situation, there will hit a point where transferring is not worth it. Hopefully you won’t need to worry about it because the pay off date will fall close to the end of a transfer period, but do the math before you transfer anything.

    You need to ensure that you’re not dealing with deferred interest, but it sounds like you’re not. If you’re dealing with for real 0% interest, and the interest kicks in on the remainder of the balance, then you’ll want to figure out what dollar amount is equal.

    So for you at $2400, paying $100 per month at 3% per year, you’ll have $1272 remaining at the end of the first year. Another 3% transfer would bring your balance to $1310.16, and with the same payment schedule you’d have $110.16 remaining. I am assuming your balance transfer actually says $5 or 3%, whichever is higher, so for $110.16 transferred you’d have to pay $5, bringing you to $115.16.

    Even at the 22.99% interest, you’d owe $110.16+($110.16*22.99%/12) in the first month, bringing you to $12.27 owed in the second month. That gives you $0.24 interest, meaning you paid a total of $2.35 interest instead of $5.

    If you’re adding your overtime payments in, you probably won’t have this issue. And honestly, it’s such a small amount of money as to be negligible. But it’s still something to think about before doing any transfers.

You may also be interested in:
  • Credit-related wiki pages

  • Credit Reports

  • FICO / Credit Scores

  • Improving Credit Scores and Building Credit

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