Skip to content

TPG reader credit card question: Do balance transfers hurt your credit score?

April 19, 2021
4 min read
Shopping On-Line And Cryptocurrency
TPG reader credit card question: Do balance transfers hurt your credit score?
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Editor’s note: This article is part of a column to answer your toughest credit card questions. If you would like to ask us a question, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.


Before you open a rewards credit card, it's important to understand how the actions you take today will affect your credit score for years to come. The same holds true if you're in debt and are working to pay it off. TPG Reader Hildy wants to know if she'll be penalized for using a balance transfer to pay off debt...

[pullquote source="TPG READER HILDY"]I pay my credit card balances in full every month and have not paid a monthly interest charge in many years. But I have taken advantage of 0% transfer offers by paying the transfer fee right away, and then paying a particular amount every month. The amount I pay each month is considerably more than the minimum payment due. So consequently I do have an outstanding balance (at 0% interest) for several months. Does that lower my credit score?[/pullquote]

Want more credit card news and advice from TPG? Sign up for our daily newsletter!

While Hildy mentioned that she's not currently in credit card debt, balance transfers can be a great strategy for paying off debt. Instead of watching your interest charges grow each month, you can open a card with an introductory 0% APR offer and transfer your balances to that card. Then you can pay your debt off over the course of 12 to 15 months (depending on the offer) without racking up any additional interest.

Related: The best balance transfer credit cards

So will leveraging a balance transfer hurt your credit score in the long run? Remember, five factors are used to calculate your credit score: Payment history, amount of debt (credit utilization ratio), length of credit history, new credit (recent inquiries) and credit mix. Let's take a look at them one by one to see what impact a balance transfer would have.

Related: TPG's 10 commandments of credit cards

Image courtesy of FICO

Payment history is by far the most important factor in your credit score, affecting 35% of your credit score. In the way Hildy described, a balance transfer therefore would not affect your score. Since she is making more than the minimum payment on her card each month, her payment history would stay strong even though she's not paying off her entire balance at the end of the month.

Sign up for our daily newsletter

However, the credit utilization ratio is a bit trickier. This factor refers to the total amount of debt you owe versus the total credit limits you have from various banks and issuers. Opening a new card for the purpose of a balance transfer would increase the total amount of credit Hildy had, which should help her utilization ratio go down. The only problem is that having a high ratio on a single card after the balance transfer might be problematic. But overall, I wouldn't expect a significant impact to her credit score in this category.

As the name suggests, length of credit history will depend on the rest of her credit history. If she has dozens of cards that have been opened for many years each, opening one new balance transfer card shouldn't impact her score. If, on the other hand, she has a short credit history and only a couple of cards, opening a new one could cause her average age of accounts to plummet, adversely affecting her score.

Anytime you apply for a new credit card, you can expect a roughly 5-point hit to your credit score from the new inquiry. Therefore, Hildy should be prepared for her score to decrease slightly if she's opening a new card for balance transfers.

Last but not least is credit mix -- a category that's unlikely to change much if she opens a new card.

Related: 6 things to do to improve your credit score

Bottom line

As long as Hildy keeps making at least the minimum payment each month, she won't be penalized for using balance transfers to pay off a large balance. Over time, her utilization ratio will drop as she pays down the balance. As long as she doesn't open too many new accounts in a short window, this sounds like a solid strategy.

Related: TPG reader question: Does it hurt to pay off your card balance before the billing cycle ends?

Additional reporting by Stella Shon.

Featured image by NurPhoto via Getty Images
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Top offers from our partners

How we chose these cards

Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
See all best card offers

TPG featured card

Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

2 - 10X points
10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day

Intro offer

75,000 bonus miles
Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

Annual Fee

$395

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day
  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

    75,000 bonus miles
  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023