Transferring Credit Card Balances - Does It Make Sense?

A question about transferring credit card balances came through the site the other day, so I thought I’d address it for all our readers.

The question was: “Is it better to have fewer credit cards maxed out…or more with lower balances if the rates are the same?”

This is a great question, and very common. Your credit score can be broken down and based on a few factors.

The first factor is repayment history. If a person is habitually late on payments, then the delayed payments will reflect negatively on a credit score.

Second, your credit score is based on the percentage of the amount of credit limit used. If a person is habitually over limit their credit limit, most companies reviewing your credit report consider consistent overages almost as bad as missed payments.

So, to answer this question, a person is better off to have multiple cards with lower amounts on them then a few cards maxed out.

For example if you have $10,000 in credit card debt you are better off to hold $5,000 on 2 different cards that have a $10,000 limit (I.E. 50% of the high credit limit on both cards) then have $10,000 on a card with a $10,000 limit.

Transferring credit card balances as outlined above (as a short term solution), may be a better option for some people.

All the best

Darrin

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