What happens to an old credit card after a balance transfer?

Managing Your Old Credit Card After a Balance Transfer: Weighing the Pros and Cons

A balance transfer can provide temporary relief from high-interest debt by moving it to a card with a lower rate. However, it’s important to understand the implications for your old credit card after the transfer.

Automatic Closure vs. Manual Closure

Unlike a loan consolidation, a balance transfer does not automatically close your old credit card. It simply removes the balance that was transferred. The account remains open and active, potentially incurring fees and affecting your credit score.

Fees and Penalties

Keeping an old credit card open can lead to annual fees, late payment fees, and other charges. If the card is no longer in active use, these fees can add up quickly and erode any savings gained from the balance transfer.

Impact on Credit Score

Closing an old credit card can have a negative impact on your credit score, especially if it has a long history and a low balance. Closing a card reduces your available credit, which can increase your credit utilization ratio. A higher utilization ratio can lower your credit score.

Considerations Before Closing

Before closing an old credit card, carefully consider the following factors:

• Credit history: Closing an old card with a long history can shorten your average account age, which is a key factor in calculating your credit score.
• Balance: If your balance on the old card is low, closing it may not significantly impact your utilization ratio. However, if the balance is substantial, closing the card could have a negative effect.
• Fees: If the old card has annual fees or other charges, it may be advisable to close it to avoid incurring additional expenses.
• Future credit needs: If you anticipate needing additional credit in the near future, it may be wise to keep the old card open to maintain your credit limits.

Recommended Approach

To balance the potential risks and benefits, consider the following recommendation:

• Keep the old card open if:

  • It has a long history and a low balance
  • You have a low credit score and closing the card would significantly shorten your average account age
  • You anticipate needing additional credit in the short term

• Close the old card if:

  • It has an annual fee or other charges
  • The balance is substantial and closing the card would improve your credit utilization ratio
  • You have other active credit cards with sufficient credit limits

By weighing the pros and cons, you can make an informed decision about whether to keep or close your old credit card after a balance transfer.