What happens to your credit card after a balance transfer?

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Balance transfer cards allow you to move a credit card balance that may be subject to a high APR to a new account that offers an introductory 0 percent APR period. However, it’s important to understand that transferring a balance to a new credit card will not close the account of the original card, the balance will simply revert back to zero.

If you applied for a new credit card expressly to transfer a balance, you might be wondering what to do with your old credit card once you’ve paid that off. It might be tempting to close it to help you avoid racking up more credit card debt in the future. But for most people, keeping it open might be the smarter move.

Here are a few things you should consider about how a balance transfer impacts your accounts,  your credit score and what you should do after completing a balance transfer.

What happens to your old account when you transfer the balance?

Your balance drops to zero, or whatever is left in pending purchases or residual balance after your transfer if, for example, you were unable to transfer the entire amount due to your new card’s limit. Your account will otherwise remain open unless you decide to close it.

Consider setting up an automatic subscription payment on the card, like Netflix or your local paper delivery, and then enroll in autopay for your statement. This will allow you to keep a small amount of activity on the card and continue building a positive credit history. That said, if you’re paying a high annual fee, or you’re concerned about the temptation to overspend, you might be better off closing your account.

What happens to your new account once you pay off the balance?

Although you may have opened a balance transfer card with the sole purpose of consolidating and paying off your debt, the account won’t automatically close after you pay off the balance. The best balance transfer credit cards tend to be lighter on ongoing perks, since their biggest feature tends to be a generous intro APR period on transfers, but there are still reasons to keep your new account open even after you’ve completed and paid off your transferred balance.

Depending on what else your card offers, in addition to benefiting your credit score, you may also be able to earn modest rewards on future purchases or utilize ongoing consumer protections. If you demonstrate responsible usage with the card over time, it’s possible the issuer may also reach out to you with another balance transfer offer in the future.

How does a balance transfer affect your credit score?

Paying off a balance transfer is a huge accomplishment and will positively impact your financial future. You paid down debt, which means you won’t have to pay interest on previous balances going forward. Since your credit utilization, or the amount of debt you have in relation to your credit limits, makes up 30 percent of your FICO score, you may also see dramatic improvements to your credit while in debt payoff mode.

Once your debt is behind you, it’s important to think about strategies that can help you to avoid racking up more credit card debt in the future. To help manage your expenses and steer clear of additional debt, you might create a monthly budget or spending plan that ensures you can afford to pay your regular bills and credit card charges in full every month.

Should you cancel your balance transfer card?

It depends. There are a number of benefits to keeping both your old account and your new account open after transferring and paying off a balance. Having available credit should improve your credit utilization, boosting your score, as well as give you extra spending power if needed.

However, if you’re paying an annual fee on either card that isn’t offset by card benefits, are concerned about accruing new debt, or feel overwhelmed by the idea of managing multiple credit cards, closing one (or both) of the accounts may be best for you. Just keep in mind that you may see a dip in your credit score as a result.

How canceling a credit card affects your credit

If you’re thinking of canceling your balance transfer credit card, you should know about the temporary (but still important) impacts you could see on your credit score.

Canceling a credit card could shorten the average length of your credit history, which could cause your score to drop. Closed accounts in good standing will stay on your credit report for two years, so this impact won’t be immediate.

More importantly, closing a credit card can have a major impact on your credit utilization, as it reduces the amount of credit available to you. If you carry balances on other credit cards, closing an account could cause your overall utilization rate to increase, thus causing damage to your credit score.

Before closing your account consider using Bankrate’s Credit Utilization Calculator to see how your credit score will be affected by a decreased credit limit.

The bottom line

Canceling a balance transfer card may cause a temporary negative impact on your credit score, but it won’t derail your credit over the long haul. Then again, you can easily just keep your old balance transfer credit card open in order to lengthen your credit history and stabilize your utilization rate. What happens after a balance transfer is really up to you, but make sure your decision is an informed one.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more.
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