I followed TPG’s 10 credit card commandments, with one exception: “You are paying your balance in full.” It’s a rule of life. Otherwise, holding balances charge monthly interest fees, which can become cumbersome. It also negates any rewards you receive, as the interest fee is much higher than any rewards or cashback you earn.
The exception to the first commandment is that when an unexpected large purchase or emergency occurs, you need to spend thousands of dollars or you won’t spend thousands of dollars. Rather than collecting interest, consider keeping the balance transfer credit card in your wallet.
Over the past decade, I certainly found myself in several situations where the balance transfer card helped me pay a large amount of balance over time. Let’s talk about why it’s beneficial to put your balance transfer credit card in your wallet.
Retain balance transfer credit card without fees
One of the best aspects of keeping balance transfer credit cards in your wallet is that they usually have no annual fees. As annual fees for premium credit cards continue to rise, knowing that sticking to balance transfer credit cards year after year won’t cost you a penny.
I applied for a DiscoverIT® Chrome card in 2014 and have more than 10 years of history. The biggest reason for keeping a card is the lack of annual fees; otherwise, it is not worth it. Every other month, my discovery Chrome gives me a quote for balance transfers and over the years I have taken advantage of quality offers with a 0% annual percentage.
Applying for a card is an investment; although I initially received my honors, it was inquiry at once and I saved thousands of dollars over the years.
Information on Discover It Chrome Card has been collected independently by Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Related: What is balance transfer fee?
Balance transfer credit card can improve your credit score
In my experience, carrying a balance transfer credit card and using it properly always improves my credit score.
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When you apply for a balance transfer credit card, you will temporarily lower your credit score due to the hard appeal. In a few months, your score will increase as your total credit limit increases.
A few years ago, emergency room visits resulted in several thousand dollars in hospital bills. Although I use mine Chase SapphireReserve® (See interest rates and fees) I know I will repay my balance in full soon, resulting in interest – or worse, falling behind payments and delays.
Instead, I transferred the outstanding balance to my balance transfer credit card. This helped my credit score in two ways. I was able to make consistent payments to my balance transfer card and lower my credit utilization on my sapphire reserves. Both of these factors led to my credit score and over the next few months I saw my credit score improve.
The last way the balance transfer credit card helped my credit score was by increasing the credit limit. When you use your balance to transfer your credit card responsibly, the issuer may increase the credit limit, or you may request an increase in the credit limit. I often ask that Chrome raises its credit limit after each balance transfer is paid off.
Recently, I paid off $8,000; when I asked for an increase, I was approved to grow to my credit limit at $8,000. This is positively reflected in my credit report as it reduces my overall credit utilization by increasing the amount of credit available in all accounts.
Related: What is the difference between hard and soft extraction in credit reports?
Balance transfer credit card is more flexible than ever
In the past, balance transfer credit cards strictly involved what type of debt could be transferred. If you want to pay off your high interest debt, you must pay it off directly by providing the balance transfer credit card and debtor account account number.
Another option is to ask your issuer to make a balance transfer check and write a check to the debtor.
Today, some issuers have the flexibility to get funds from balance transfers. When you initiate a balance transfer online, you may be given a quote for depositing funds into your checking account. This flexibility can help if the debt is not with another creditor, or if you need cash to pay a big payment elsewhere.
Last year, I was moving. The company I chose was rated as high, but only cash was accepted. In this case, I was able to transfer the cash amount to my checking account in advance. My balance transfer credit card arrears are shown like any other balance and I am able to pay off my balance within six months without paying interest.
Related: What happens to your credit card after the balance is transferred?
Bottom line
The key point is to spend responsibly and always be in your means. Don’t think of balance transfer credit cards as a way to spend now and then pay. Instead, consider it as an investment in your financial situation and the lifeline of the situation when a large or unexpected purchase may occur.
Keeping your balance transfer credit card for years and using it is a great way to protect your savings and check your account balance. You can use cash in other situations such as down payments for a home or business startup funding.
At the same time, using balance transfer credit cards correctly can also improve your credit score, helping you get a premium card that was once out of reach.
Related: Best Balance Transfer Credit Card Add to Your Wallet
