Transferring your debt to a balance transfer credit card is a great way to jumpstart your journey to becoming debt-free.
But once you’ve eliminated debt balances and your card’s introductory balance transfer period expires, is it worth keeping the card open? Can it be a useful tool as you begin building new, healthier credit habits?
Put some thought into choosing the right card for your debt payoff plan and long-term use from the beginning, and you can continue to benefit from your new card beyond the introductory period. Also take stock of your spending habits and challenges to know when keeping a card may not be the best choice for you.
Here are a few things to consider:
What other uses can a balance transfer card have?
Many of the best balance transfer credit cards on the market are enticing not only for their introductory zero percent interest periods, but also because of the other benefits you can enjoy as a cardholder.
For example, the Capital One® Quicksilver® Cash Rewards Credit Card offers 1.5 percent cash back on every purchase you make and a $150 cash bonus when you spend $500 within the first three months of account opening. That’s in addition to its 15-month zero percent interest introductory period for balance transfers (15.74 – 25.74 percent variable APR thereafter). After you finish paying your debt balance, you can earn up to $180 cash back each year after spending just $1,000 monthly.
Similarly, the Citi® Double Cash Card, offers a substantial 18-month zero percent introductory period on balance transfers (15.49 – 25.49 percent variable APR thereafter). You can also earn 1 percent cash back for every purchase you make and another 1 percent as you pay off that purchase for a total 2 percent cash back on everything you buy.
Many balance transfer cards also offer equal or similar zero percent interest introductory periods on purchases. For example, the BankAmericard® credit card offers zero percent interest on both purchases and balance transfers for 18 billing cycles (14.49 – 24.49 percent variable APR thereafter), and you must transfer your balance within 60 days of account opening. If you’re focusing on paying off debt, you shouldn’t add to your balance even further during your payoff period, but if you pay your debt in full before the period ends, having a few extra billing cycles of zero percent interest on new purchases can help ease you into a healthier relationship with credit.
Find a card that will work for you over time with benefits and rewards that suit your long-term goals, and you won’t have to worry about what you’ll do with it after you’re debt-free.
Repercussions of closing a card
If you’re not quite sure if closing your balance transfer card will help you in the long run, consider the effects on your credit before making a decision.
Closing a credit card account can harm your credit score because it may impact multiple credit report factors that make up your score, from average age of accounts and credit utilization to credit mix. If you have a great score, your card isn’t the oldest on your credit report and you can keep your utilization below 30 percent, you likely won’t see much effect from closing it. But if it’s a large part of your overall report, it can be more beneficial to leave the account open and put small amounts onto the card each month to keep it active.
If you want to close your account because you’re worried about overspending, consider taking the card out of your wallet and putting it away in a secure place so you won’t be tempted to use it daily. You can even set it up to pay your recurring monthly expenses like utilities or subscription services that you pay off each statement cycle so the account is active.
When you should cancel your balance transfer card
If your debt doesn’t stem from a single large expense or loan and, instead, is the result of an extended period of overspending, it may be in your best interest long-term to take a break from credit use after you’ve paid your debts.
You know yourself and your spending habits better than anyone else. If you’re unable to use a credit card responsibly right now and don’t want to put yourself at risk of taking on a high balance again, it may be best to simply close the account.
In the short-term, your credit score may take a hit, but if the alternative is risking overspending and earning high-interest debt, it’ll likely be a small price to pay. And once you have a handle on budgeting and you’re in the right financial place to consider credit again, you can work to boost your score and find the perfect card for you.
Many balance transfer credit cards are useful beyond the expiration of their zero percent interest introductory periods. Find a card that both works for your debt payoff timeline and has rewards that align with your everyday spending. If your debt balances are the result of continuous overspending, though, putting your card away for emergencies only or setting it up to pay your recurring monthly bills can keep the account active without tempting you to overspend.