Balance transfer impact on your credit score

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Dear To Her Credit,
I like to transfer a balance from one credit card to another when they offer 0 percent interest. These are credit cards that are already opened in my name, but they are paid off. Does transferring my balances between credit cards hurt my credit score, even though I'm not transferring them to "new" cards?  -- Lisa


Dear Lisa,
Transferring balances between existing cards to take advantage of lower interest rates won't hurt your credit. You're not applying for new credit, which can temporarily lower your score. You're also not changing the number of cards you own. And your total credit utilization ratio -- balance owed compared to available credit -- stays the same.

It's great that you keep tabs on your card interest rates. All too many people just use the card with the available credit, or the card that's earning them airline miles, without paying much attention to the interest rate.

A couple of things about your card transferring plan worry me, however.

If you're actually transferring balances from one card to another, you are likely to pay a balance transfer fee. Transfer fees are often about 3 percent of the amount you are moving to the other card. That adds up quickly, especially because you are charged the transfer fee immediately. When the 0-percent interest period ends, you will be charged interest on any remaining balance. If you transfer the balance again, you will most likely pay another 3 percent.

Another potential problem is if you have enough cards you can transfer back and forth from, you may have too many cards. Having a lot of cards makes your financial life more complicated. It's easier to miss a payment or not realize how much debt you have accumulated over a number of cards. Some people spend more when they have a deck of cards to shuffle through at the checkout counter. Besides, there's no doubt you are more susceptible to fraud and identity theft when you have a lot of cards. Someone could take or "borrow" one, and you may not even notice right away.

There's one strategy far better than transferring balances between low-rate or 0-percent interest credit cards: not having balances at all. As long as you have credit card  debt that you need to keep bouncing around from one place to another, you're focusing on maintaining that debt and keeping it from doing more damage. It's at best a holding pattern, not a solution.

If you can focus more of your attention on eliminating all consumer debt, you can transform your life. Stop thinking of credit card debt as inevitable -- as if it's something everyone has, that you just have to live with. Everyone doesn't have credit card debt. In fact, in 2014, only 34 percent of Americans carried credit card debt from month to month. If you're financially savvy enough to keep a sharp eye on your credit card interest rates every month, you're savvy enough to figure out a way to join the majority of Americans with no card debt at all. Once you pay off your debt, you can look for ways to invest and get the highest rates of return, instead of minimizing damage caused by debt. Once you're an investor, not a debtor, positive financial results can begin to snowball.

So go ahead, transfer your balances to a 0 percent interest card you already own. But do so only as part of a short-term plan to demolish your consumer debt and start setting higher financial goals for yourself. Your potential is unlimited. Good luck!

See related: 2015 Balance Transfer Survey: Offers more generous, but move fast

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Updated: 11-24-2017