What Happens to My Old Credit Card After the Balance Transfer?

September 20, 2019
What Happens to My Old Credit Card After the Balance Transfer?

There are lots of interesting balance transfer-related questions out there, and I just stumbled across one I haven’t touched upon.

It has to do with the “old credit card” involved in the transaction, the card that should have a zero balance once you’ve completed your balance transfer.

In short, a balance transfer involves two credit cards. One with debt on it that is subject to high APR, and another, which is the destination credit card with the low or 0% APR.

For example, if you’ve got $5,000 in unwanted credit card debt (I guess it’s all unwanted) on your Chase credit card, and see an offer to move it to an Amex balance transfer card, you may open a second credit card to transfer the debt.

Once the $5,000 balance is transferred to Amex, you’ll have a Chase credit card with a zero balance.

Nothing magically happens to it other than the balance dropping to zero or whatever you paid off via the balance transfer.

Still, you might be wondering what to do with it.

Tip: Make sure the balance is indeed zero before you think you’re good to go. Don’t miss any minimum payments or erroneously leave a small balance on the card and forget about it!

Should I Close My Credit Card After the Balance Transfer Is Complete?

  • You are under no obligation to do anything with the old card
  • Determine if it has an annual fee and if it’s worthwhile to keep
  • An open card with no balance could be beneficial simply to boost your credit scores and credit history
  • But it’s typically not very damaging to close a credit card either

The answer to this question depends on a number of factors, which we’ll discuss right this very moment.

First, does the old credit card have an annual fee? If yes, is the card worth keeping open after accounting for that annual fee?

If yes, great, keep it open and enjoy the benefits it offers, while doing your best to not run up debt on the card again.

If the card doesn’t have an annual fee, the same question applies. Is it worthwhile to keep in your wallet? No? Well, maybe you can close it, but wait.

One should consider the fact that a credit card with a zero balance can be beneficial to your credit score and credit history.

Closing Credit Cards Can Impact Your Credit Scores

  • FICO scores factor in available credit and average age of accounts
  • Losing a zero-balance credit card hurts your credit utilization
  • Closing an old credit card hurts your average credit age
  • However, the impact might be minimal and nothing to worry about in the long run

After all, it boosts your available credit because you’ve got an untouched credit line, which offsets the $5,000 balance on your other credit card.

Credit utilization plays a big part in credit scoring, so having available credit can increase your credit scores. Or at least keep them afloat.

Additionally, there’s the credit history to think about. Another component of credit scoring has to do with average age of accounts.

Using our example from above, if you opened the new Amex credit card, it would lower the average age of all your credit accounts.

To make matters worse, closing the old credit card could lower the average age of your accounts even more.

For instance, imagine you’ve had the old Chase credit card for 10 years. If you close it, you lose a decade of credit history.

There is some residual benefit to recently closed accounts, but over time you lose any benefit and the average age of your accounts might be adversely affected.

The reason age of accounts is important is the idea that someone who opens a bunch of new accounts might be either desperate for credit or new to credit, and therefore higher risk.

Someone with a bunch of old accounts and positive payment history, who has also exhibited good debt management, should have excellent credit.

Now all that being said, it’s not that big of a deal to close a credit card. I actually can’t stand it when people say never close your credit card.

I’ve closed credit cards on numerous occasions and nothing bad has happened.

As long as you practice other healthy credit habits, like paying all bills on time and keeping balances low, you should be just fine.

In summary, you can do whatever you want with the old credit card. Keep it open, close it, the world is your oyster.

Read more: Does a Balance Transfer Hurt Your Credit Score?

Leave A Response