What Happens To Your Old Credit Card When You Make a Balance Transfer?

If you’ve made a balance transfer to an old credit card, you may be wondering, what happens to your old credit card after making a balance transfer? We will explain this in much detail below.

What Happens To Your Old Credit Card When You Make a Balance Transfer?

When you perform a balance transfer from an old credit card to a new credit card, the card issuer of your new credit card moves your balance from your old card to your new credit card by paying off the balance on your old card and charging the amount to your new credit card plus the balance transfer fee.

Transferring your balance from an old credit card with high interest to a new credit card with a 0% introductory interest rate can be a great way to pay off your balance since you’re only paying the principal. You’re not being charged interest on the outstanding amount that’s due.

That said, performing a balance transfer does not automatically close down your old credit card. The only thing that will happen is that your debt is paid off only if you were able to transfer over the entire amount that was due on the card.

Your ability to completely pay off your old car depends entirely on the credit limit of your new account. If your new account has a credit limit that’s higher than the amount you want to transfer over, you will be able to transfer the entire balance to your new card. However, if your credit limit does not exceed the amount on your old car, you will not be able to transfer the entire balance to your new card.

Should You Close Your Old Credit Card After Making a Balance Transfer?

If you make a balance transfer that completely wipes out the debt on your old credit card, you will be able to close that credit card. But, the question then is whether you should close your old credit card? Before closing an old credit card that is in good standing, you should know the impact that closing a credit card has on your credit score.

Closing a credit card can potentially lower your credit score because it can increase your credit utilization, and whenever you increase your credit utilization, you will notice a drop in your credit score. Your credit utilization refers to how much of your available credit you’re using, the lower your credit utilization, the better your credit score will be. Your credit utilization accounts for 30% of your credit score.

When you close down a credit card, you’re reducing the amount of total available credit that you have thereby increasing your credit utilization. When your credit utilization increases, your credit score will drop. So, keeping an old account open may be worth it to keep your credit utilization as low as possible to keep your credit score as high as possible.

That said, if you want to close down your old credit card to prevent yourself from racking up more debt, then closing the account may be worth it. But, you should keep in mind that your credit score may drop as a result of closing down your old credit card.

Also, it’s worth noting that closing down your old credit card does not remove it from your credit report. If you made all of your payments on time on your old credit card, it will remain on your credit report for 10 years from the date you close down your credit card.

However, if you’ve missed payments on your old credit card, it will remain on your credit report for 7 years from the date you missed your first payment on the card. After the 7 year period, it will automatically be removed from your credit report.

What Are Some Common Reasons For Transferring a Balance From An Old Credit Card to a New Credit Card?

Here are some common reasons for performing a balance transfer from an old credit card to a new credit card:

1. Reduce the Amount of Interest That You Pay

Most people perform balance transfers from an old credit card to a new credit card to take advantage of promotional interest rates to reduce the amount of interest they’re paying. For example, if you have an old credit card with an interest rate of 17% and your new credit card has a promotional 0% interest rate for 12 months, it makes sense to transfer over the balance to your new card because you will not pay any interest on the balance for 12 months. This makes it significantly easier to pay down the balance on your credit card since you will avoid paying any interest on the balance for 12 months.

2. Debt Consolidation

If you open a balance transfer card that has a high credit limit, your new card can be used to consolidate debt from several credit cards onto a single balance transfer card. This makes it significantly more simple by allowing you to see all your debt on a single credit card. Also, it makes it easier to manage your debt. For example, instead of having three credit cards to manage, you can consolidate your debts onto a single credit card, enabling you to manage all of your debt by paying down one credit card.

3. Utilize Balance Transfer Card to Get Out of Debt

Since balance transfer cards often come with an introductory 0% APR that typically lasts for anywhere between six and twelve months, this can be a great opportunity for you to pay down your balances to get out of debt faster. That said, to benefit from a balance transfer card, you must resist the temptation of adding to your debt by charging items on your balance transfer card. Use the introductory period to pay down as much debt as you possible can.

How To Perform a Balance Transfer?

The first step to perform a balance transfer is to either using an existing card or open a new credit card that provides you with the ability to perform a balance transfer at an introductory 0% APR. If you don’t have a credit card that permits balance transfers, look for a new card that does permit them. When searching for a good credit card, check to see how long the introductory 0% APR period lasts. Most credit cards offer anywhere from six months to eighteen months.

Once you have a balance transfer card, contact your card issuer to perform a balance transfer. That said, before performing a balance transfer, you should keep in mind that most card issuers charge a 3% to 5% fee of the total amount to be transferred. For example, if you want to transfer a balance of $10,000 from your old credit card to your new balance transfer card, your card issuer may charge you a 3% fee that comes out to $300 just for performing the balance transfer.

Once you know the fee and agree to it, perform your balance transfer by contacting your card issuer and providing them with the information they need to complete the balance transfer.

What Should You Do After Requesting a Balance Transfer?

After requesting to transfer your balance from an old credit card to your new credit card, you should keep the old account open and continue making timely monthly payments on your card until the balance is paid off. You should continue to make at least the minimum payment on your old credit card until the balance transfer goes through because your payments will still be due. Not making your payment on the due date could cause the account to become late, causing significant damage to your credit. After the balance transfer is complete, you have the option of either closing the card or keeping it open. If you want to maintain a high credit score, many experts suggest keeping old accounts that are in good standing open because they provide a boost to your credit score.

Frequently Asked Questions (FAQs)

1. Does a balance transfer close your old credit card?

No, a balance transfer does not close your old credit card. Your old credit card will remain open after transferring a balance from it to a new credit card. It is up to you to close your credit card after a balance transfer. That said, if you have a credit card that has been open for a long period of time and is in good standing, you should keep your card open for it to continue to have a positive effect on your credit score.

2. Can you use your old credit card after a balance transfer?

Yes, you can continue to use your credit card after a balance transfer. However, you should be aware that the introductory 0% APR may only apply to the balance transferred amount and not the entire balance on your new credit card.

3. What happens at the end of a balance transfer?

After you’ve transferred your balance to a new credit card, you must begin making payments on your new card. You should try to pay off your balance before the 0% APR introductory period ends. After the period ends you will be charged a significantly higher interest rate on the balance.

4. Do balance transfers hurt your credit score?

No, performing a balance transfer does not hurt your credit score. However, applying for a new balance transfer card can shave off a few points from your credit score since a hard inquiry will be added to your credit report when you apply for a balance transfer card.

5. How does a balance transfer work?

With a balance transfer, your card issuer will pay off the balance on a different credit card that you have. After the balance has been paid off, your card issuer will transfer the balance to your new credit card plus the balance transfer fee.