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March 20th 2020

How to combine credit cards

Keeping track of the balances and payments on several cards can be daunting, but there is a way to cut down on the number of cards or payments you make: balance transfer.

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Credit cards are an effective way to establish your credit history, and if managed correctly, they can benefit your credit score. However, having multiple credit cards can be difficult for some people to manage. Keeping track of the balances and payments on several cards can be daunting, but there is a way to cut down on the number of cards or payments you make: balance transfer. Below, we explain how balance transfers to a single card work.  

What are the benefits of combining credit cards?

if you’re currently making monthly payments on multiple credit cards, you may be able to combine them into a single credit card with one payment each month through a balance transfer. While you’ll stay have to repay your outstanding debt, here are a few of the main benefits: 

  • Saving money.

    If you have good credit, you may qualify for a lower interest rate when you combine multiple credit card accounts. Lower interest rates mean lower payments, which may help you save money on any debt you owe. Many balance transfer cards offer an introductory interest rate of 0% on transferred balances. However, note that once the introductory period is over, interest will be applied to the balance. Paying down as much of the transferred balances before interest kicks in is in your best interest. 

  • Improved credit score.

    Combining credit cards could potentially benefit your credit score. Transferred accounts are paid off when you combine credit cards, and you’ll only have to make a single payment instead of multiple payments which can reduce the risk of missing payments. Payment history has a big impact, accounting for 35% of your total score. Even one late payment can bring your score down 100 points.

  • It’s just easier to manage.

    Having one card instead of multiple cards is a lot easier to manage. You won’t have to worry about keeping track of the balances on multiple cards or shuffle through your wallet to make sure that you’re using the right credit card.

Are there any downsides to a balance transfer? 

While there are benefits to combining credit cards, there are also a few downsides. If done correctly, a balance transfer could benefit your credit score and help you save money; however, there’s also a chance it could decrease your credit score or incur hefty costs. 

  • Higher credit utilization ratio.

    Closing credit card accounts will lower the total amount of credit available to you, which could increase your credit utilization ratio. Credit utilization ratio refers to the total amount of credit you’re using, compared to the total amount of credit available to you. Your credit utilization ratio accounts for 30% of your credit score. Thus, combining credit card accounts could potentially decrease your credit score.  For example, if you have one credit card with a $4,000 credit line and no balance and a second credit card with a $2,000 credit line with a balance of $1000. If you closed the first card, your credit utilization would jump from 16% to 50%. That's because your available credit would drop from $6,000 to $2,000 but your balance of $1000 wouldn’t change.

  • Hard inquiries.

    Whenever you apply for a new line of credit, the lender checks your credit history. This is known as a hard inquiry, which accounts for 10% of your total credit score. Thus, if you’re applying for a new card to transfer your balances to, it could bring your credit score down a few points. 

  • Increased interest rate.

    While a balance transfer can reduce the amount of interest you’re paying on your debt, in the end, you might end up paying more. For example, you transfer your balances to a credit card that has an introductory interest rate of 0%. If the interest rate shoots up after the introductory period and you don’t pay down your debts enough beforehand, then you could end up paying more in the long run. 

Despite these potential drawbacks, combining credit cards is generally considered beneficial and can still help improve your credit score.

Should you consider combining credit cards? 

If any of the following apply to you, combining credit cards might be in your best interest: 

  • You have high-interest rates.

    If your credit cards have high-interest rates, transferring to a single card with a lower interest rate might save you money.

  • You want to simplify debt management.

    Instead of having to manage and pay multiple accounts, you’ll only have to manage and pay for one credit card, making it easier to keep track of your balances and your monthly payments.

How to combine credit cards

If you’ve decided that a balance transfer is the right option for you, use the following steps to combine your credit cards: 

  • Find out what your balance.

    Before you transfer your balances, it’s important you find out what they are. You can check your most recent statements (unless you used your cards since then. as new charges won’t show up until the next statement). To make sure all debts are accounted for, contact your credit card issuers directly and find out what your outstanding balances are. Make sure that new transactions, interest rates and fees are added to the total. 

  • Shop for balance transfer cards.

    Several credit card issuers offer balance transfer cards, many of which offer great incentives, like an introductory interest rate of 0%. 0% interest rates can be effective for 12 or even 24 months. When shopping for balance transfer cards, make sure to find out what the interest rate will be once the introductory period is over. It’s also important to find out if there are any fees associated with transferring your balances. Some credit card issuers charge fees to combine credit card balances.

  • Make sure debts can be transferred.

    Make sure that the debts on your existing accounts are eligible for a balance transfer. Some credit card issuers may not allow all debts to be transferred over to the new account.

  • Apply for the balance transfer card.

    Applying for a balance transfer credit card is usually pretty straightforward. You can fill out a paper application and send it to the credit card company through mail or apply online. Make sure you have all the necessary information ready, including your account numbers and the balances of the cards you’re transferring over. Make sure to also review the application before you submit it. Once submitted, you may receive a response in as little as a few minutes. If approved, you could receive your new credit card within two weeks. 

  • Activate the account.

    Your new credit card will be sent in the mail, complete with activation instructions. Usually, you’ll have to call a provided phone number and give basic personal information. Afterward, the card will be activated, and the credit card issuer can process the balance transfer request. Typically, it takes up to six weeks to complete the transfer process. Note that it isn’t recommended to put new charges on the card before the balance transfers are complete.

  • Confirm the balance transfers.

    You’ll want to check your account balances once the balance transfers have been completed, both on the new credit card and on the accounts that you transferred. The new card should contain the balances of the previous accounts, while the previous accounts should have a balance of zero. 

  • Close your old accounts.

    Once the balance transfers have been confirmed, you can contact the card issuers of your transferred balances and close your accounts. 

The takeaway

Combining credit cards can be beneficial to your credit score and your financial well-being. Before transferring balances, however, make sure you do your research. It’s also important that you properly manage the new account; otherwise, combining cards could be detrimental instead of beneficial. 

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