Can you continue to transfer credit card balances?

There’s no doubt about it: credit card debt is a huge burden for many Americans.

In fact, according to TransUnion, the average U.S. credit card balance in the second quarter of 2022 was $5,270. If you want to take a break in interest payments so you can focus on shrinking your balance, you can take advantage of the initial 0 percent APR offers on balance transfers.

The idea is to transfer all your credit card debt to a new balance transfer card and then pay off the entire balance within the 0 percent APR period. However, some cardholders are focusing on reducing rather than eliminating their debt. At the end of the offer, they transfer their balance to the new card and continue to pay on it.

While this can be a useful strategy in some scenarios, there are a few things to consider before making multiple balance transfers, such as the impact on your credit score and rising fees.

How can transferring the balance help you break the cycle of overspending?

Balance transfer does not offer a quick solution to your finances. However, it can be an effective tool if you’re trying to break the cycle of overspending and get out of debt.

Balance transfer can help you in two ways. First, it can consolidate your debt on one card instead of trying to pay off several debts on different cards, each of which earns interest separately. Balance transfer can also help you reduce your overall interest payments if you can transfer your balance to a card with a lower interest rate.

Important Factors to Consider When Transferring Multiple Balances

It is important to be aware of the biggest disadvantages of the balance transfer chain, such as:

• Negative impact on your credit score due to multiple complex inquiries and a decrease in the average age of credit scores (if you are approved).
• The balance transfer fee is usually 3 or 5 percent (often a minimum of $5 or $10) of the transfer amount.
• There is a chance that you will not be approved for another balance transfer card, especially if multiple complex requests and high credit usage on your existing cards have lowered your credit score.
• It’s possible that your new credit limit isn’t high enough to transfer your full balance, which means you’ll still have to pay interest on the remaining debt on your old card and keep track of multiple accounts.

When does it make sense to transfer the balance several times?

A multi-balance transfer strategy makes sense if you plan to aggressively pay off your credit card debt but are unlikely to pay off your entire balance before your first promotional balance transfer period expires.

It’s also helpful if you have a good credit score from the start, so that any negative impact of applying for multiple cards won’t greatly affect your chances of getting the next one approved.

Transferring one or two large balances may be better than multiple small balances as you may end up paying more in balance transfer fees if the amounts are too small (remember that some issuers have lower limits on balance transfer fees) . You should also try not to transfer your balance more than a few times, as applying for multiple new cards in a short amount of time signals to issuers that you are planning to overspend.

When does it not make sense to transfer the balance several times?

This strategy is not a good idea if you only plan on making minimum payments to your balance. This will stretch your debt over several years and you may need many new cards to transfer your balance. This will mean several transfer fees and the possibility of paying interest on your old card if you are denied a new one.

You should also avoid this strategy if your balance sheet’s APR is currently below average. Although Balance Transfer Cards offer a low or 0% annual interest rate during the promotional period, you will still have to pay the regular annual interest rate at the end of this period if you are not approved for a new card.

Finally, the whole purpose of transferring your balance to a new card is to spread payments over time while saving on interest. However, this is not intended to free up space on your old card so you can accumulate even more debt. If this is your plan, you’re better off avoiding this strategy altogether.

How do multiple balance transfers affect your credit score?

Multiple balance transfers can affect your credit score in different ways. Some of these effects may be good, others less so. However, it is difficult to predict exactly how your credit score will change each time you apply for a new balance transfer card. Here are the main ways that a multiple balance transfer strategy can affect your credit score:

• Complex QueriesA: Every time you apply for a new credit card, a tough request is recorded on your credit history. Each time, new requests reduce your score by 5-10 points.
• Length of credit historyA: The age of your credit scores is 15 percent of your FICO score. The new credit reduces the average age of your account and the age of your new account, which negatively impacts your score.
• Multiple paymentsA: If approved, you will have a new credit score to track. Your payment history makes up 35 percent of your credit score, so if managing multiple accounts makes it difficult to make payments on time, it can hurt your score significantly.
• Credit utilization ratioA: Getting a new card increases your available credit, but does not necessarily increase your total debt. This means you’ll have a lower credit utilization rate, which is a good thing, especially considering it’s 30 percent of your total FICO score.

What will happen to your old account when you transfer the balance?

If you are transferring a balance, you may also want to consider permanently closing the account. However, closing it will increase your credit utilization ratio as you will limit the total available credit while still paying off your debt.

Once you have paid off your debt in full, you can either close it or keep it open. Keeping it open can help improve your credit score by keeping your credit limits open while keeping your credit usage low (which you hopefully do when you’re out of debt).

On the other hand, if you are certain that you no longer need the card (for example, if it has an annual fee that you no longer want to pay), closing it may be a good idea, regardless of the impact on your credit score.

bottom line

Multiple balance transfers can be a tricky way to pay off credit card debt. This may not be the best option for those who are already experiencing financial difficulties or are simply looking for a way to delay paying their balance. However, there are some potential benefits to consider. Signing up for a balance transfer card can be a smart way to save on interest if you intend to pay off your debt as soon as possible.

Keep in mind that multiple balance transfers can damage your credit history, but if you handle them responsibly, this could be the right financial decision for you.

Jordan Bishop is a former CreditCards.com employee. He discovered the power of credit cards at a young age. His first surge in travel hacking came with the wildly viral launch of the Yore Oyster, which brought him national media attention and over a million frequent flyer miles.