Does Transferring Balances to Another Credit Card Hurt Your Credit?

Opening new credit card accounts for balance transfers can hurt your credit.

Moving balances from high-interest credit cards to cards with low- or no-interest may seem like a smart financial move, but playing the credit card shell game can actually hurt your credit score.

Opening Accounts

If you're opening a new credit card account for the express purpose of transferring a balance, expect your credit score to be suffer a bit. "Just opening a credit card account to take advantage of the offer can ding your scores by 5 points or so," says MSN Money's Liz Pulliam Weston.

Debt Utilization

Even if you are willing to take the hit to your credit score that comes with opening a new account, moving balances from several high-interest cards to one with a zero balance can do even more damage.

"The FICO formula typically would rather see $1,000 balances on five cards than a $5,000 balance on one card," says Weston.

Account Stability

It's not a good idea to put all your eggs in one basket, credit-wise. But don't think that opening several low- or no-interest cards is the key. The more accounts you have open, the more your credit score suffers. And if you close out the accounts you transferred the balances from, your credit score dips even lower.

References

• MSN Money: Weird Stuff That Hurts Your Credit

Resources

• 10 Bad Habits That Lead to Debt Disaster