Transferring Credit Card Debt To A New Card May Help Boost Your Score

February 28, 2018

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Most Americans carry a lot of debt in the form of credit cards.  It's such a big business that many banks and financial institutions offer zero percent interest rates by opening new lines of credit. While you may think its best not to open new credit and pay off your debt, it's not necessarily the smartest financial decision. According to editors at Two cents dot com, it depends on a number of things but you could greatly benefit by opening a new account and transferring the balances over to save money on interest charges.  That's because your FICO score, the number banks and lenders use to determine if they offer you credit and at which interest rate can benefit.  Behind your payment history, credit utilization is the second biggest factor in determining your credit score. Having high limits and low balances is key.  So it’s better to have 5 cards with a low balance than one card with a high balance.  So a balance transfer may be the way to secure an additional line of credit while saving your interest charges.  So for instance you have a store credit card with a 26% interest rate, you may want to transfer that to a 0% introductory card to save money as long as you keep that 26% interest rate card open with a zero balance (or pay it off before interest is charged). The more accounts you have open with low or no balances will increase your credit score.  It’s also important to check the interest rate after the promotional period, especially if you will not be able to pay off the entire debt. Most balance transfers usually incur a fee, so if the difference in the interest rates isn’t at least a couple of percentage points, the fee cancels out any interest charges saved. But you would have an additional line of credit. Just remember if you do decide to transfer, do not run up the paid off card or new line of credit as high balances on too many cards may result in lowering your credit score or banks cancelling your cards. Also before you start applying, check your credit score to make sure it’s at least 660. If so, look for your best offers, paying special attention to the fees charged and if interest acres from the opening the account or when the 0% promotional period is over.

SOURCE: Two Cents

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