Do Balance Transfers Hurt Your Credit Score?

Whether a balance transfer may help or hurt your credit score depends on whether you open a new credit card or use an existing card to take a balance transfer, as well as how you use the balance transfer to pay off existing debt.

Let’s take a deeper look into how balance transfers can affect your credit.

Using an existing card for a balance transfer

The impact of a balance transfer may vary, since different credit scoring models weigh factors like credit utilization and payment history differently. In many cases, a balance transfer has its most direct impact on your credit utilization ratio, which is the percentage of your available credit you’re using. Lower credit utilization is generally better for your credit score. Some models compare your total balances with your total available credit across all accounts. If you move a balance to another existing credit card without adding new credit or new debt, your overall utilization may stay about the same and your credit score may not change much.

Some credit scoring models also look at utilization on individual cards, not just your overall total. If one card is close to or at its limit, that high utilization may negatively affect your credit score, even if your overall utilization remains similar. Some models may also consider patterns like your average utilization over time.

Additionally, using an existing credit card to take advantage of a promotional balance transfer offer could help you pay off higher-rate balances over time and save on interest, while avoiding a hard credit inquiry associated with opening a new card.

Keep in mind that balance transfer fees are typically added to your balance, which could increase the amount you owe.

Opening a new card account for a balance transfer

Applying for a new balance transfer credit card may help your credit score by increasing the overall amount of credit you have available, improving your credit utilization ratio. Some cards may also offer a low introductory APR on balance transfers, which could help you manage interest payments while paying down your debt.

However, it's important to know that adding a new card could lower your average account age, which makes up part of your credit score. If you apply for several balance transfer cards at once, that can be a red flag to creditors. When you apply for a credit card, the credit card company will typically request to review your credit report as part of the approval process. The request is recorded as a hard credit check or a hard inquiry, which can lower your score by a few points. A hard inquiry can stay on your credit report for up to 2 years and affect your credit score for up to a year, though the impact may lessen over time.

Repeatedly transferring balances

You may see low introductory APR offers on balance transfers from balance transfer credit cards as a way to help delay interest from accruing against your debt. If that promotional window is about to expire, but your debt hasn’t been paid down, you may think that moving the debt again to another low intro APR card can buy you more time. But with each application for a new card, your credit score may take a minor hit.

Multiple requests within the same year can negatively impact your credit score. Getting approved for another balance transfer card could become more difficult. Eventually, your debt may have no place to land without earning interest. Because of this, it’s usually best to take advantage of low introductory APR offers as a window for you to significantly pay down your debt, not to simply avoid interest payments for a while.

How to potentially help your credit score with a balance transfer

Here are some steps you could consider taking to use a balance transfer card to pay off debt and potentially help improve your credit score.

Check your existing credit cards for a promotional balance transfer offer

Before applying for a new card, review your current credit cards to see whether any offer a promotional balance transfer APR. Some issuers periodically extend low or introductory APR offers to existing cardmembers, which could allow you to transfer balances without opening a new account. Using an existing card may help you avoid a new credit inquiry and preserve your average account age.

Calculate how much you need to transfer and how long repayment will take

Add up the balances you want to transfer and estimate how much you can realistically pay each month. Comparing your payoff timeline to the length of a promotional APR period, whether on an existing card or a new one, can help you determine if the transfer aligns with your goals and budget.

If needed, find a new balance transfer credit card with a low introductory APR

To maximize the impact of a balance transfer, consider opening a new credit card that features a low intro APR if your existing card accounts don’t have a promotional offer on balance transfers. While your overall account age will drop, you may be able to get more credit and pause higher interest charges.

Interested in applying for a new balance transfer credit card? Citi has a wide array of options, including the Citi^® Diamond Preferred^® Card and Citi Simplicity^® Card.

Use the balance transfer credit card’s low introductory APR period to pay down debt

Balance transfer cards typically offer low interest rates on balance transfers for a limited amount of time. Use this low-interest period to make as big of a dent in your debt as possible to help you avoid higher interest rates on your debt when the introductory period expires. Paying off debt using a new balance transfer credit card or a balance transfer offer from an existing card can reduce your credit utilization and help improve your credit score.

Citi offers several low intro APR cards with different durations to meet your needs, such as the Citi^® Diamond Preferred^® Card and the Citi Simplicity^® Card. These credit cards can provide financial flexibility and come with other features and benefits for you to enjoy.

Make credit card payments on time

When you transfer a balance, you’re still required to make at least the minimum payment on time each month. If you fail to pay the minimum on time, you may lose your introductory or promotional rate. Check the terms and conditions of your card offer for more details.

Know when your interest rate will increase

After the introductory or promotional period for balance transfers ends, your interest rate will typically go to the standard rate for purchases. Your unpaid balance will then be subject to this higher rate — which can make your monthly payments higher. Before you commit to a new balance transfer card or begin the process with an existing card, understand how long the introductory or promotional rate period lasts and what the APR will be when it expires.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.