You can profit from a balance transfer, where you send a credit card balance to a new lender, because many companies offer a low or often zero percent introductory rate. You can also use this time of no interest to help improve your credit rating. A balance transfer alone, however, does not improve your credit rating and could backfire.
How a Balance Transfer Can Help
If you open a new account to conduct a balance transfer and keep your old one, you increase the amount of available credit and lower your credit utilization, according to Wallet Pop. Using more than 35 percent of your available credit begins to negatively impact your credit score. Additionally, you can use a balance transfer rate of zero percent as a time to pay off your debt free of interest payments.
Considerations
Check the terms and conditions before initiating a balance transfer. If you cannot pay off your debt within the promotional period, you could find your new interest rate makes debt repayment unmanageable. In addition, most credit card companies have provisions that take you off the teaser rate if you miss a payment.
Convenience
Using a balance transfer to consolidate multiple lines of credit could help reduce missed payments and your minimum charge when you only have one bill. Also, having multiple lines of credit, but only using one, looks better to lenders than the use of several credit cards.
Warning
Some credit card companies may offer a zero percent introductory offer, but put a three to five percent surcharge on your balance transfer, according to the Motley Fool site. Also, you may need a certain credit score to qualify for the teaser rate. If you play the balance transfer game too much, credit card companies will get wise to the fact that you are hopping from company to company, looking for teaser rates.
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