BACK

Reaping Your Rewards

Too many credit card balance transfers can be a bad idea

Balance transfer credit cards, which enable consumers to shift high interest credit card debt to a lower interest credit card, are an excellent tool for anyone looking to cut costs as they pay off their debt. However, a repeated pattern of transferring from one balance transfer credit card to the next each time the introductory annual percentage rate expires can be a bad idea. While such a strategy will enable the credit cardholder to temporarily avoid paying interest on their existing debt, it can present some other hazards over time. 

Credit card balance transfers

Cardholders need to realize that a balance transfer strategy may not be able to be carried out indefinitely. For one thing, there is a danger you could eventually stop getting approved for balance transfer credit cards, which could leave you stuck holding debt at a much higher interest rate when the APR on your latest credit card jumps to its regular level. 

Continually opening new low interest credit card accounts and shifting money without attacking the overall debt could worry lenders, potentially hurting your chances for borrowing money in the future. Credit card issuers favor customers who pay interest, viewing customers who transfer debts over and over to avoid paying interest as less-than-ideal borrowers. 

Such excessive balance transfer behavior can also make it tough to borrow money from other lenders outside of the credit card industry, such when shopping for a home or automobile.

Separately, should you make a misstep -- for example, by making a late credit card payment -- your credit card's regular (and undoubtedly much higher) interest rate will get triggered.  That could also result in a sudden surge in the APR on your credit card debt.   

Another reason to be wary of performing too many balance transfers is that the low interest rate you get with a new balance transfer credit card may just apply to the transferred balance itself. It is important to note whether the low interest rate on balance transfers also applies to purchases. Should you need to make a new purchase with the card, the interest on your spending could be at the credit card's regular interest rate. 

Meanwhile, be aware that with a balance transfer credit card, all the payments you make will likely first be applied to the 0 percent portion of your debt. As a result, any other credit card spending will accumulate interest until the transfer is paid off and you can then tackle the most recent charges.

However, all these warnings do not mean that a credit card balance transfer is always a bad idea. In fact, balance transfer credit cards can really work in your favor if used sparingly. If you don't go overboard with transferring balances, and pay attention to any balance transfer fees your credit card may carry, transferring your balance to a lower interest credit card can be an excellent way to save yourself some money as you pay down your debt.

See related:Balance transfer calculator

What’s up next?

In Reaping Your Rewards

10-step plan for graduating to a prime credit card

While most people wisely avoid subprime cards -- which feature low credit limits, high annual fees and sky-high annual percentage rates -- they are one of the best ways for consumers boost their credit before graduating to a better card, experts say.

Published: December 5, 2008

See more stories
Credit Card Rate Report Updated: June 19th, 2019
Business
15.61%
Airline
17.54%
Cash Back
17.68%
Reward
17.57%
Student
17.79%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.