How To Balance And Transfer Credit Cards

Recently there has been a lot of discussion about transferring balances with high interest credit cards with a much lower interest rate and many believe this is a great way to pay your debt off faster and improve your finances. It’s not as simple as transferring one debt to another place, there are other aspects to work out before you rush into this. If you follow this article we can show you how balance transfers affect your credit scores and the best way to reduce your debts and increase your cash flow.

Balance Transfer Credit Cards and How to do I use them?

The calculation to calculate ones credit score is almost as difficult in cracking Google’s search engine algorithm. What you have purchased and how quickly you paid this back is the primary backbone behind this, however there are several factors that the banks will and can’t tell us that attributes to their overall yes or no on find your best credit card. Here’s an indication into some of the top Australian Credit Card Providers weighting in credit scores

• 35% Credit Card Historical Information

• 30% Credit Card Outstanding debts

• 15% Established Credit Card Information Generated

• 10% On New Credit That Is Being Paid

• 10% On The Type Of Credit You Have Generated

As we can see from the above the two biggest factors are how much debt you have and how quickly you have paid that off. As a guide this information provides us with the baseline for credit card scores. When looking at balance transfer credit cards we need to consider that most people think that by closing the old credit card automatically means your credit score will improve – this is because it will lower the age of your credit cards and this accounts for 15% of your score. In simple terms you’re losing your credit history with one simple cancellation. This usually doesn’t apply if you’ve had your credit card for less than 12 months as there is little time to build up history on your payments.

In addition, if you cancel your old credit card account then transfer your debt to a new provider you are lowering your debt to card ratio which makes up 30% of your credit score. Closing the account gives you less credit available to you, which means you are suddenly using more of your available credit even though you haven't spent any more money.

It's also true that opening a credit card account – like the one you want to transfer your higher interest balances to, will result in a lower credit score. New accounts make up 10% of your new credit score, so, when you open a new credit card it’s possible that you will take a hit early and your credit score will be quite poor. However if you’re not planning on getting a massive loan or need immediate finance this will be beneficial in the long run as you have saved on interest rates or increase the amount of rewards you get through your provider.

Goals for Balance Transfers and finding the best credit card

Balance Transfer Credit Cards are a great way of reducing your credit card costs however there are several key areas that need to be considered. A good starting point and a general rule I use is to have 30% of your available credit utilized. From here, you should look at transferring funds to the best available interest rates and leave your old accounts open. In the meantime, don't charge any additional credit until you’re below the 30% mark and build on this. You will notice this simple tip can help you consolidate finances and reduce costs quickly and efficiently.