Thursday, January 5, 2012

To do a balance transfer or not

My credit card balance of 10k is currently sitting on a card with a promotional 0% interest rate from a previous balance transfer that is set to expire this month.   In the past I would have just transferred the balance to one of my other cards and not thought about my credit card debt until the new promotional rate was expiring.  This time my choice is not so clean cut.  First of all, I am determined to pay off the whole balance by the end of this year so does it make economic sense to pay the transfer fees vs. the higher interest rate?  Secondly, neither of my other cards have a high enough limit to transfer the entire balance so does it make sense to split my balance amongst multiple cards?  And lastly, are there other impacts that I should be considering… I’ve heard that doing balance transfers is bad on the credit score so what’s the real truth behind it?

The first question was pretty easy to answer using the calculators on
If I keep the balance where it is I am guaranteed to pay $970 in interest over the course of the next 12 months with monthly payments of $936 which is a pretty steep number to come up with each month.
If I balance transfer from Card 1, I could do $4,800 to Card 2 (0% till 10/12 then 8.99%) and $5,200 to Card 3 (5.99% for 12 months).  I would be paying $192 in fees and approx. $200 in interest over the next 12 months.  Obviously the cheaper option is to transfer the balance.

But by splitting the balance and transferring to Cards 2 and 3 I essentially max those cards out and leave my highest interest card the only fall back option I have… this sounds dangerous to me for so many reasons!  First, because I don’t have a savings account as a fall back I frequently have to put business expenses on a card and then wait for a reimbursement.  Second, if something financially major were to happen I would be stuck relying on my worst card.  Lastly, Card 3 has the best rewards program around and I use it for everything I would normally buy like gas, groceries, pet food and then cash in the points so I would be losing the financial return on all my expenditures while the balance transfer sits on it.  It doesn’t seem to make much sense to me to do both balance transfers.

And what about the last question… does it hurt my credit to keep shuffling around the debt?  I found these articles helpful: and
Since I’m not opening a new account to transfer the balance just taking advantage of my existing cards offers, I won’t get dinged for that.  However, it sounds like by transferring my balance to lower limit cards and maxing them out could have a negative impact.  I'm not planning on buying a house or car within the next few years though so I'm not really that concerned with a few points off the credit score.

I think the best bet for me is to transfer half the balance to Card 2 and keep Card 3 paid off… now I just hope they approve the transfer!

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