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When you transfer a balance on your credit card, you're moving your debt from one card to another, often to take advantage of lower interest rates. You’ll know your balance transfer is complete when your old card's balance decreases and the new card reflects the transferred amount. However, this process won't close your old card automatically.
Your old credit card remains active after a balance transfer until you request to cancel it.
Depending on how much you transfer, and your card utilization, you may see your credit score drop. Diligently paying the balance and lowering your utilization should help it back up.
While there may be exceptions, keeping your old credit card account open is generally beneficial as it can positively impact your credit score.
Your old card doesn't automatically close after successfully transferring a balance to another credit card. It remains open and active, minus the debt you've moved to the new card. If you still have charges, fees or interest on your old card, you must keep paying these off.
Here's how a balance transfer works: The issuer of your new credit card either pays off the old card directly or provides you a check to do it yourself. Continue payments on the old card until you receive confirmation that the balance transfer is complete.
You'll see the transferred balance on your new card, including any applicable balance transfer fees. Due to timing differences, you may see the balance in both your new and old cards. In this case, call your card issuers to ask about the status of your transfer.
Remember, while transferring credit card balances can be a strategy to manage debt, continually transferring balances without paying them down can negatively impact your credit score.
Instead of closing your old credit card, keep it open to maintain your credit history and available credit. If the card charges an annual fee, consider downgrading it to a no-fee card if its perks aren't worth the cost. -- Lee Huffman, credit card expert at BaldThoughts.com
A balance transfer can affect your credit score in various ways. Whenever you apply for a new credit card (and not just for balance transfers), card companies pull a hard inquiry on your credit report, which can temporarily lower your credit score.
Once your application is approved, your overall credit limit increases with the addition of the new card, which can decrease your credit utilization ratio, a positive for your credit score. However, if the balance transfer almost maxes out the new card, the utilization rate on that specific card spikes, potentially harming your credit score.
Your credit utilization across accounts drops as you pay off the balances, especially on the new card. Along with better financial habits, you’ll see the impact of the hard inquiry roll-off, and your credit score will improve over time.
If your balance transfer is delayed and you've paid the minimum to avoid penalties, interest will accumulate on the remaining balance until the transfer is complete.
After the balance transfer is finalized, the payment you made will be adjusted against the balance on your old account. Should the transfer amount cover the whole balance, and there's an overpayment, you'll usually see a credit on your account. You can use it for any future charges on that card.
Once you've transferred a balance from one credit card to another, there are several steps you should take to ensure you're managing your debt effectively.
Mark your calendar with the end date of the promotional period. Focus on paying off your balance before the end of the introductory period. Any remaining balance will accrue interest at a higher rate after this period.
Decide what to do with your old card. If you choose to keep it open, use it responsibly to avoid accumulating more debt. If you decide to close it, know the potential impact on your credit score.
Regularly check your credit score and report to ensure all the information is accurate and to see how the balance transfer impacts your credit over time.
Before you decide to cancel your old card after a balance transfer, there are questions that you need to ask. Does your old credit card carry any annual fees? Or maybe you still need the card in the future and don’t want to lose any current rewards.
You should keep your card open if:
Otherwise, we suggest closing your old card if:
If you don’t want to close your account but are worried about the annual fee, you can request a credit card downgrade. Essentially, you’re requesting a new card with lower annual fees and fewer benefits. And since you’re already an account holder, you won’t be subject to any hard inquiry, and the average age of your credit remains.
Be sure to ask your card issuer about its policies on downgrading a card, as it may limit your options. For instance, Chase only allows downgrading within the same card category. You can’t downgrade an Ink Business Preferred (business card) to a Chase Freedom Unlimited (personal card). You can’t also downgrade between Chase’s co-branded cards.
We've answered some common questions about the topic to help clarify this process and its effects on your credit management.
No, a balance transfer doesn't automatically close your old card. The card stays open and active, and the debt is shifted to your new card. However, any pending fees, installments or unpaid balances not included in the transfer must be settled separately on your old card.
If a balance transfer isn't reflected on your old card, verify the transfer with your new card issuer first. Then, reach out to your old card issuer to confirm receipt of payment. Always ensure you keep up with minimum payments to avoid penalties.
A balance transfer doesn't necessarily harm your relationship with the old issuer, especially if you maintain the account in good standing. However, if you close the account or leave it inactive, it could potentially impact future credit offerings from the same issuer.
Typically, rewards or points accumulated on the old card remain intact after a balance transfer, provided the account remains open. However, closing the account can lead to losing unredeemed points or rewards, so checking the issuer's policy is important.
Canceling your balance transfer card after paying it off may do more harm than good. It has the same effect as canceling your old credit card. If your balance transfer card does not come with fees, keep it active. You can also request a credit card upgrade with your bank.
About Doug Milnes, CFA
Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.
Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.
