If you’ve got good credit, you likely get frequent offers for new credit cards. Not just any offers, but offers promising special deals like no or low interest rates. It's all designed to make this card look so sexy and inviting that you must have it, even if it means dropping your old plastic. Closing a card for a new one can be beneficial, but it can also hurt your credit score. Read the fine print or speak with an agent before you make an impulsive move.
Watch the Details
One common offer is to transfer a balance to a new card with a low interest rate or temporary interest-free offer. You need to read the fine print about the new company, and call them to determine if they will transfer a balance from your old card. Some lenders offer different cards under different names, and won’t allow you to transfer a balance from one of their cards to another. It doesn’t make sense for them to stop charging you interest on a card they’ve already issued to you for no reason.
Balance Transfer Rules
Keep reading the fine print to see how long that promotional transfer rate lasts. You may find the "real" rate, the one that kicks in after the promotional rate, is higher than the one on your current plastic. The promotional rate itself may have stipulations. Find out what the rate will revert to if you violate one of those stipulations. For example, you might receive a 0 percent APR for one year on a balance transferred to a new card. If you miss a payment or go over your credit limit, the promotional APR could be dropped immediately, which can trigger a high rate on the transfer.
Shopping for Cards
Don't apply for credit cards thinking you can cancel them with no effect on your credit score. Each time a potential credit card issuer pulls your credit report with your permission, you’ll get dinged by a few points on your score. New lines of credit can also decrease your credit score. You might apply for a new card, then find that you only received a small line of credit. If you keep the card open, you’ll be stuck with that new account on your credit report.
Keep Older Cards
Don’t automatically cancel an older card. It's still useful to your credit reputation since credit history is part of your score. Make a charge or two on them every few months just to keep them active, then pay them off right away so the balance doesn't count against you. That will help out your debt-to-available-credit ratio, another boost to your overall credit score.
Transferring a balance usually costs you a fee based on the amount of the balance. Add the transfer fee, the new interest rate and any transfer fee to see how much you really save with a balance transfer. If the promotional rate lasts six months, and the new card comes with an annual fee, it might not be worth it to open the new card, especially if you can’t afford to have your credit score decreased.
Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.