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What happens to your old credit card after a balance transfer?

Yahoo Personal Finance· Getty Images
Jess Ullrich and Kendall Little
Updated 6 min read

Credit card debt is expensive compared to other types of borrowing. Recent data from the Federal Reserve shows that the average credit card annual percentage rate is around 21.47%. While this may not mean much on its own, it’s considerably higher than the rates for other forms of consumer debt, including personal and auto loans.

If you carry a balance on your credit card, those interest costs can add up fast. Fortunately, a balance transfer credit card may be an option to help reduce your financial burden. Here's how balance transfers work, what happens to your old credit card once a transfer is complete, and how this can impact your credit score.

A balance transfer involves transferring a balance from one credit card to another. Generally, people do this to move credit card debt from a high-APR credit card to a new balance transfer credit card with a 0% introductory APR. Doing so can make it easier to repay the debt without hefty interest charges.

The first step in the process is opening a new credit card with a 0% introductory offer on balance transfers. Here are a few balance transfer cards with 0% intro periods available today:

These cards often require good credit, so consider this when you apply. If you're approved for a new credit card, you’ll receive it in the mail within a few business days.

Can’t decide on a credit card? Check out Yahoo’s best credit card picks

After that, you can contact your old credit card issuer to initiate the balance transfer. Every card issuer’s balance transfer process differs slightly, but you can generally transfer a balance to a new 0% introductory APR credit card online or over the phone. Be ready to provide your new and old credit card numbers and the amount you plan to transfer.

Many assume their old, high-interest credit card will automatically close once the balance transfer goes through to a new card with a 0% introductory APR, but the card actually remains open.

At that point, you can keep spending on the old card, leave it open and avoid using it, or close it entirely and destroy the physical card. To keep building a positive credit history, you could spend a small amount on the old card and pay it off in full each month, but whether that’s the right course of action for you depends on your financial situation.

Closing your old card may not be the best choice, as it could impact your credit score. That’s because popular credit scoring models FICO and VantageScore consider the age of your credit accounts when calculating your credit scores. Closing an account could shorten the average length of your credit history.

The age of your credit history accounts for 15% of your total FICO score, and depth of credit accounts for 20% of your VantageScore. Generally, the longer your credit history, the better, so if your old credit card has been open for several years, you may not want to close it.

Once you’ve transferred a balance from an old card to a new one, taking the following steps can help ensure you keep your credit score trending in the right direction.

If you leave your old credit card open and use it sparingly, set up automatic payments so you don’t unintentionally pay late or miss a payment. Scheduling automatic payments will help ensure you keep building a positive payment history.

You’ll want to pay off your new card’s balance before the 0% introductory period ends. After it ends, the card’s regular APR will apply, and you could incur costly interest charges if you still carry a balance.

You can calculate your ideal monthly payment amount by dividing your total balance by the number of months in the introductory period. So if you’ve transferred a $5,000 balance to a new card with a 12-month 0% APR offer, your monthly payment amount would be around $417 if your goal is to repay your debt before the intro period ends.

Depending on your situation, you may need to rework your budget slightly to account for different monthly payment amounts. Determine how your new monthly payments fit into your budget and what you need to adjust to accommodate them.

Completing a balance transfer will affect your credit in a few different ways, and the effects may vary depending on how you manage your payments.

The first step in the balance transfer process is opening a new 0% introductory credit card, resulting in a hard credit inquiry. Your credit score could dip by a few points due to this hard inquiry, but the drop is generally small and temporary.

The positive payment history will likely boost your credit scores as you pay down your new card. The amount of credit you’re using relative to your total credit limits across all cards will also decrease as you make payments, which could also have a positive effect.

Credit cards generally come with high rates, but certain cards offer 0% APRs for a set time, often 12 or 18 months. These cards may let you transfer a balance from a high-rate card to take advantage of a temporary lower rate.

A balance transfer credit card — especially one with 0% APR — can be a great way to make your credit card debt more manageable and reduce your interest costs. Your old credit card will remain open after the balance transfer is complete, and you can decide whether you want to keep using it, stop spending on it, or close your account.

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