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Credit Card Balance Transfers Know-Hows


Now a days everyone owns at least one credit card. Most people juggle multiple cards all with different balances, which has just become part of everyday life so why not take advantage of it. Transferring balances has the benefits of setting your finances straight and improving your credit score. The following tips can help utilize those opportunities.

Transferring credit card balance is simply moving the amount you owe on one card to another.

The first thing to know is while making a credit card balance transfers, is it's effect on your credit utilization, which is how much of your available credit you use monthly. Credit utilization is a big-determining factor when it comes to credit scores.

Credit utilization = Total open credit card balances / Total open credit card limits

If you transfers a large sum from a maxed out credit card, to a card with very low utilization and balance, chances are you'll see an increase in your credit utilization ratio. A better ratio means a better credit score.

The next positive side effect of transferring balances may be lowering your overall APR. Annual percent rate, or APR, is your interest rate which a card holder can be charged if the balance is not paid off in time. It is not unusual for one credit card to have multiple APR's. APR can often be burdening, but transferring balance from an account with high APR can save you money in the long run.

However, when you lower APR, you are essentially trading FICO points for a lower APR, meaning your credit score might be temporarily effected but can increase when the utilization is paid.

Ultimately, people want to know if transferring balances will lower their credit score. If you lower the total utilization by getting a new card or by moving money around could result in improving your credit score.

The only downside is that if you transfer a balance you run the risk of it overlapping, having high balances on both card at the same time. This could affect your credit score in the short term, but should be corrected once the balances are updated.

We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Source: The Street | Credit Card Balance Transfer

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