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One of the biggest drawbacks of these cards is that they are typically just for people with good or excellent credit. What can you do if you have only fair credit? It would still be possible to get one of these cards if you could get a friend or family member that has better credit to cosign with you. In fact, it would be a good idea is to check your credit score before applying for a balance transfer card. If you haven't seen yours recently you can get it free from one of the credit reporting bureaus ( TransUnion, Equifax, Experian) or on a site such as CreditSesame and CreditKarma. If you have a credit score above 661 you would likely qualify for a balance transfer card. On the other hand, if your score is below 660 may need to try to find a cosigner. According to an article published on NASDAQ.com, the average FICO score is 692.
Transferring multiple balances
You can transfer balances from multiple credit cards into the new balance transfer card so long as the sum of those balances doesn’t exceed the transfer limit you’re assigned. Keep in mind that there are credit card companies that will cap the amount you can transfer at a lower level than your total credit line. In addition, you generally cannot transfer a balance from one card to another with the same card issuer. For example, you would not be able to shift your Chase Freedom card balance to a new Chase Slate card. This means you may need to shop carefully to find a card where you will be able to transfer all of your balances.
How this will affect your credit score
Your credit score can be affected several ways when you open a balance transfer card. For one thing, a significant part of your credit score is based on the average age of your credit accounts. The longer the average age the better it is for your credit score. When you open a new card that shortens your average age and this will ding your score. This is why it's important to keep your old cards. Second, when you apply for a new card this results in what's called a hard inquiry on your credit report, which will lower your score. So don’t apply for several different cards in a short amount of time.
On the upside, getting that new card can help your credit score because it lowers what's called your credit utilization ratio. If you're not familiar with this term, it's the percentage of the total credit you have available that you've used up. For example, if you have total credit available of $10,000 and have used $3000 of it, your credit utilization ratio would be 30%, which is very acceptable. Of course, your credit utilization ratio will stay low only if you use the new card to pay off your existing balances and not to create new debt.
Understanding the fine print
While getting a zero percent balance transfer card could be of real help it could also turn into a real headache making it important that you follow these pointers.
For example, you need to keep your old card or cards open but don't use them. If you close an old card this could hurt the average age of your credit accounts, which would damage your credit score. It will help if you keep those cards open but make sure you keep their balances at zero. According to an article published on NerdWallet, the average credit card debt is $15,762. If this is your balance, you have a long way to go in terms of bringing your card debt down.
Second, watch out for balance transfer fees. Most credit card issuers charge a transfer fee of 3% to 4% so make sure to factor this into the equation when adding up your potential savings.
It's absolutely critical to make all of your payments on time. Miss just one payment during your 0% interest introductory period and the issuer will likely cancel the deal and raise your interest rate – to maybe as high as 19%.
Finally, make sure to keep track of your 0% interest-free period. The card issuers are not required to give you notice when your introductory period is about to expire. When it does expire you'll owe interest which typically will be at a high rate on whatever balance you still have. Some of the credit card companies may even make you pay up all the interest you would have incurred during the 0% period. The moral of this story is to read the fine print and pay off the entire balance owed before your introductory period expires.
For more information
If you'd like more information about how zero balance transfer cards work and their pros and cons here's a short video you should watch.