You might be able to move a credit card balance from one balance transfer card to another, but it’s probably not the best way to manage debt.
There’s no question about it: Credit card debt is a huge burden for many Americans. In fact, in 2021, the average credit card balance in the U.S. was $5,525. If you’re looking to get a break from interest payments so you can focus on reducing your balance, you might want to take advantage of introductory 0% APR offers on balance transfers.
The idea is to transfer all your credit card debt to a new balance transfer card, then pay off your entire balance during the 0% APR period. That said, some cardholders focus on reducing, rather than eliminating, their debt and at the end of the offer end up transferring their balance to a new card and work on continuing to pay it down.
While this can be a useful strategy in some scenarios, there are several things to consider before pursuing multiple balance transfers, like the impact to your credit score and mounting fees.
Important factors to consider with multiple balance transfers
It’s important to be aware of the biggest drawbacks to a string of balance transfers, such as:
- The negative impact on your credit score from multiple hard inquiries and a decreased age of credit (if you’re approved)
- Balance transfer fees, which are generally 3% or 5% (often with a minimum of $5 or $10) of your transfer amount
- Possibly not getting approved for another balance transfer card, especially if multiple hard inquiries and high credit utilization on your existing cards has lowered your credit score
- Maybe not getting a high enough credit limit to transfer your full balance, meaning you’d still have to pay interest on the residual debt on the old card and keep track of multiple accounts
When does it make sense to transfer a balance multiple times?
A multiple balance transfer strategy makes sense if you plan on paying your credit card debt aggressively but are unlikely to pay the entire balance off before your first promotional balance transfer period expires.
It also helps if you have a good credit score to begin with, so that any negative impact from applying to multiple cards won’t significantly hurt your chances of being approved for the next one.
Transferring one or two large balances may be better than several small balances, since you could end up paying more in balance transfer fees if the amounts are too small (remember, some issuers set lower limits on balance transfer fees).
When does it not make sense to transfer a balance multiple times?
This strategy is not a good idea if you plan on making only minimum payments on your balance. It will stretch your debt over a period of years, and you’ll possibly require many new balance transfer cards along the way, which will mean multiple transfer fees and the potential to be left paying interest on your old card if you are denied a new balance transfer card.
You’ll also want to avoid this strategy if your balance is currently subject to a lower-than-average APR. Even though balance transfer cards offer a low or 0% APR for the promotional period, you’ll still have to pay the regular APR once that period ends if you don’t manage to get 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. It’s not, however, intended to free up space on your old card so you can accumulate even more debt. If that is your plan, you’ll do better to avoid this strategy altogether.
How do multiple balance transfers affect your credit score?
Multiple balance transfers may impact your credit score differently. Some of these effects may be good, others less so. However, it’s hard to predict exactly how your credit score will change every time you apply for a new balance transfer card. These are the main ways a multiple balance transfer strategy could affect your credit score:
- Hard inquiries: Every time you apply for a new credit card, a hard inquiry is recorded on your credit history. Hard inquiries account for 10% of your FICO score, with new inquiries lowering it anywhere from five to 10 points every time.
- Length of credit history: The age of your credit accounts makes up 15% of your FICO score. New credit lowers your average account age and the age of your newest account, both of which negatively impact your score.
- Multiple payments: If approved, you’ll have a new credit account to keep track of. Payment history makes up 35% of your credit score, so if managing multiple accounts makes it harder for you to make payments on time, this could hurt your score significantly.
- Credit utilization ratio: Getting a new card increases your available credit while not necessarily increasing your overall debt. This means that you’ll have a lower credit utilization ratio, which is good, especially considering that it accounts for 30% of your overall FICO Score.
Multiple balance transfers can be a hard way to pay off credit card debt. It may not be the best option for those who are already struggling financially or just looking for a way to stall paying off their balance. There are, however, some potential benefits to consider. It can be a smart way to save on interest if you’re committed to paying your debt as soon as possible.
Keep in mind that multiple balance transfers can hurt your credit score but if you handle them responsibly, they may be the right financial decision for you.