Debt Consolidation And Credit Transferring balance from a high interest credit card to a new lower interest card can definitely save you money on interest, if nothing else at least until the introductory rate ends (if applicable). We all receive those infamous credit card offers in the mail, urging us to apply for a new card and transfer our high interest balance over, in order to take advantage of the lower interest rate that this new card has to offer.
A card designed for people new to credit or with credit problems in the past. 39.9% Typical APR (variable) Promotional Link Details - - 0% balance transfer 0% balance transfer and purchase 0% best card overseas Prepaid cards Low Credit Score Entire card listing (alphabetic) Loyalty cards Business cards Charge cards Charity Sports credit profile.
Check Credit Rating This seems like a logical thing to do, right? I mean, lower interest rates on your credit accounts equals more money in your pocket, true? Yes, transferring your credit card balance from a high interest credit account to a lower one is an excellent way to save money on interest, especially if you carry a lot of debt on your credit card(s).
Many people are switching their credit card balances and reaping the rewards of a better deal. Transferring your balance can be an effective way to reduce your charges. The best credit card deal for you would have a 0% balance transfer rate and a low interest rate. There are many different credit cards to choose from that offer an introductory 0% interest rate. Some may have interest free periods as long as 12 months.
Improve Credit Rating But how does this affect your credit rating and credit score? The answer to that question really depends on your situation, and how you go about it.
Intelligent Finance has announced the launch of a new credit card, which offers a low life of balance transfer rate of 4.9% APR.
Your Credit Score Is… Your credit score is a numeric assessment of your creditworthiness and is used by lenders when deciding whether or not they'll give you a loan or extend you a line of credit. And that's just the beginning. Your credit score can affect your loan amount or line of credit, the terms of your loan and your interest rate. Think of your credit score as a report card for your credit history.
Credit Score Rating Scale Lets say you have $5,000 in debt on a credit card account from "ABC Credit Services", which has a total credit line of $10,000. For this example, lets just say this is currently your only open credit card account. Since your debt takes up half of your total credit line, this would put your percentage of debt compared to your credit line, for this account, at 50%. We'll call this your "debt percentage".
Free secondary and garage card, linked to the primary card
Free courier delivery of your card free credit on balances settled in full
Balance transfer facility, allowing you to move a credit balance from other credit or store cards to your BLUEBEAN credit card at 3% below the prevailing interest rate for a six months
Free lost card protection (LCP)
Free travel insurance
ATM withdrawal functionality a programme that allows you to purchase branded, lifestyle goods, at wholesale prices, delivered to your door at no extra charge.
Bad Card Credit Credit People You're making payments to ABC with no problems and you seem happy with the account and the interest rate. That is, until one day you check your mail, and there it is, a credit card offer from "XYZ Credit Services" with a fixed interest rate set at half of what you're paying now with ABC! Suddenly dollar signs start popping up in your head, and you start trying to figure out how much money you could save by transferring your $5,000 balance to XYZ. You then decide you're going to apply for the account at XYZ. Your credit is good right? No problem! You receive the card in a week or so, and go ahead with the balance transfer.
Credit Rating Scale How this balance transfer affects your credit rating and credit score really depends on what you do from this point on, and also what your credit line is on your new card from "XYZ". If your credit line on your new card is lower than that of the original "ABC" credit account, then your "debt percentage" will be higher, which generally will lower your credit score. This would be true if you closed the original account at ABC, and kept your new account as your only open credit card account.
Bad Credit Rating If you've had your "ABC" credit card for a while (maybe 2 years or more), and you have a good payment history with them, then it will most likely be in your best interest to keep that account open, even if you don't use it. Especially if your credit line with your new lower interest card is below $10,000. Usually for the sake of your credit score, you don't want to increase your "debt percentage", you want to decrease it.
Credit Rating Agency For example, if you keep both accounts open, you will have a total credit line of $20,000. With your $5,000 in debt on your new card, and your original account at ABC having no balance, your debt percentage would only be 25%, which is a good percentage and your credit score will reflect that.
Credit Rating Canada Now reverse that and say that you closed your credit account from "ABC", given that your credit line at "XYZ" stays the same, you would have a debt percentage of 50%, which is what you started out with in the beginning. Add to that a newly acquired credit card with little or no payment history on it, and you're credit score would almost surely decrease, at least until you establish a longer payment history on your new account.
Bad Credit Mortgage Rating So for this example, it would probably be best to keep both accounts open. Your lower debt percentage could possibly offset the hit your score took from obtaining your new credit card. And looking to the future, it should look better on your credit report this way too.
Credit Score Rating Chart When trying to keep your credit score as high as possible, try to avoid doing anything to increase your debt percentage. Even though the amount of debt you are carrying on your "revolving credit" is the same, it will always look better if you're using 25% of your total credit, compared to using up 50% of it.
Good Credit Rating Score Be sure not to take it too far by applying for more credit than you need, just because you think it will help your credit score by having an even lower debt percentage. Obtaining any new credit will generally bring down your credit score slightly, at least for a short period of time. Applying for credit too much and too often will almost always have a negative impact on your credit score, which is exactly what you don't want. Your time would be better spent on trying to pay down this debt instead.
Balance transfers such as this can and will save you money on interest, if you do it right. Stay informed about how things like this affect your credit, and you should be just fine!
Catalogue: Finance | Credit Cards Title: How Credit Card Balance Transfers Can Affect Your Credit Score By: Jake Rustenhoven
