Maybe this sounds like a dream come true, but do you ever really know when something is too good to be true? Sure, it does sometimes turn out to be that good, but sometimes there can come negative consequences along with these money saving benefits. If there was any way to avoid such pitfalls, you would want to do so, right?

So what kind of negative effects can there be because you do a balance transfer from one card to the next, and going from one interest rate to another? One major thing that is affected is your credit score. Sometimes doing a balance transfer from your old credit card account to a brand new one, whether it will save you money or not, can actually hurt your credit score instead of help it. Here’s why:

1. Debt Percentage

Your debt percentage is the amount of money in a percentage out of how much your credit limit is. So if you have a credit card balance of five hundred dollars and your limit is a thousand, then your debt percentage is 50%. You do not want this percentage to get above fifty percent, because it can hurt your credit score. In fact, the lower your debt percentage, the better it is for your credit score.

Your debt percentage can change automatically if you do a balance transfer, whether or not you charge on that credit card. This is because the limit on the credit card you transferred your balance to may be lower than it was on your previous card. This raises your debt percentage, making it more likely for you to reach or exceed your limit, making you a potential threat to creditors. This results in the downfall of your credit score, all simply because you wanted to save a little extra money with lower interest rates.

However, you can get a lower debt percentage by transferring your balance to a different credit card. This will occur if you transfer to a credit card with a higher limit than the one you had before. You can also lower your debt percentage by leaving both credit card accounts open, therefore having both limits add up to be one big one, making your balance seem smaller when compared to your limit.

2. Debt Percentage Obsession

Though there are ways you can save money on interest and improve your debt percentage situation at the same time, it can get out of hand. Opening too many credit card accounts just so that you can keep lowering your debt percentage is a mistake, because too many credit accounts that do not have a long payment history on them poses a threat to creditors, therefore lowering your credit score. It can actually hurt you to go overboard with new credit accounts, rather than improve your situation.