Balance transfer credit card terms explained

Updated

If you’re doing research on balance transfer cards, you may come across some confusing terms. Instead of learning these terms the hard way, by making mistakes when transferring your credit card balance, we’re here to help before that happens. In this quick guide, we’ll explain some common and important terms you should know when making a balance transfer.

The basics

Balance
Your balance is the amount of debt you owe.

Balance transfer

Typically, you initiate a balance transfer to move debt from one credit card to another card. You might do this because:

  • The other card has a better interest rate, or
  • You want to consolidate debt from multiple cards.


Though balance transfers are usually for credit card debt, you can often transfer many different types of debt, including student loans, mortgages and auto loans.

Balance transfer kiting

Balance transfer kiting is transferring your credit card balance to a new card that offers introductory rates, sometimes as low as 0%. Credit card kiting isn’t illegal, but can be risky. Repeat transfers to avoid paying interest rates on a balance that you can’t afford to pay off can lead to a mountain of debt. Furthermore, it can negatively affect your credit score if lenders see that you keep high levels of debt.

Credit score
A credit score is a number assigned to you between 300 and 900 that summarizes your financial health. Anytime you apply for a loan or credit card, lenders check your score to determine your interest rate, with the higher scores getting the best interest rate. Sometimes you can be turned down for a loan if your score is too low. Credit scores are released by TransUnion Canada and Equifax Canada, the two credit bureaux. They determine your score based on factors like payment history, age of credit and debt-to-income ratio, among other things.

No-fee balance transfer card

With a no-fee balance transfer credit card, you’re not charged fees when you move debt to it. Sometimes, this perk is temporary, lasting up to 60 days or so. Other card providers may offer no balance transfer fees indefinitely.

Keep in mind that though a no-fee balance transfer card doesn’t charge balance transfer fees, it may still charge annual fees, foreign transaction fees, cash advance fees and more.

Joint balance transfer

A joint balance transfer is when a balance is transferred to or from a partner or family member’s credit card. Not all credit card providers allow this process, but there are many that give you the option to move your debt to a partner or family member’s credit card.

There are two ways to do this: one is where you can transfer between two names, while the second way is to create a joint account for the debt. Transferring between accounts involves moving your balance to a new card with your partner’s name attached to it. This essentially moves the responsibility of the debt and could increase your partner’s debt-to-income ratio, while helping yours. Creating a joint account allows you and your partner to share equal responsibility for the debt.

Compare balance transfer credit cards for 2020

Name Product Purchase Interest Rate Balance Transfer Rate Balance Transfer Fee Annual Fee Minimum Income Reward Description
BMO Preferred Rate Mastercard
12.99%
3.99% for the first 9 months (then 12.99%)
1%
$20
$15,000
Take advantage of an introductory balance transfer offer, annual fee waiver in the first year, and low purchase and cash advance interest rates.
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
BMO Rewards Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Get 1 BMO Reward point for every $1 spent on eligible purchases, and get 2 BMO Rewards points for every $1 spent at participating National Car Rental and Alamo Rent A Car locations.
Earn a bonus of up to 15,000 BMO Rewards points. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO AIR MILES Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Get 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and get 1 AIR MILE for every $20 spent elsewhere.
Earn 800 AIR MILES Bonus Miles. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO CashBack Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases.
Get up to 5% cash back on all eligible purchases in the first three months of card membership (up to a maximum spend of $2,000, and earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases thereafter). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
BMO AIR MILES Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and earn 1 AIR MILE for every $20 spent elsewhere.
Earn 800 AIR MILES Bonus Miles. Plus, get a 1.99% introductory interest rate on balance transfers for 9 months. A 1% fee applies to balance amounts transferred.
BMO CashBack Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
1%
$0
$15,000
Earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases.
Get up to 5% cash back in the first three months (up to a maximum spend of $2,000, and earn 3% cash back on groceries, 1% on recurring bill payments and 0.5% on all other eligible purchases thereafter). Plus, get a rate of 1.99% on balance transfers for 9 months, with a 1% fee for every transferred balance.
No-Fee Scotiabank Value Visa Card
16.99%
3.99% for the first 6 months (then 16.99%)
N/A
$0
$12,000
Save with a low interest rate, no annual fee and a balance transfer offer.
Get a 3.99% introductory interest rate on balance transfers with a 0% balance transfer fee for the first 6 months. Apply by October 31, 2020.
Scotiabank Value Visa Card
12.99%
0.99% for the first 6 months (then 12.99%)
N/A
$29
$12,000
Save on interest for 6 months by consolidating your higher-rate balances with the balance transfer offer, and get an on-going 12.99% interest rate on purchases, cash advances and balance transfers.
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by October 31, 2020.
Scotia Momentum Visa Card
19.99%
2.99% for the first 6 months (then 22.99%)
N/A
$39
$12,000
Earn 2% cash back on all eligible gas station, grocery store and drug store purchases and on recurring bill payments (up to a $25,000 annual spend), and earn 1% cash back on all other eligible purchases (and on all eligible purchases once the $25,000 annual spend is reached).
Get a 2.99% introductory rate on balance transfers and a 0% balance transfer fee for the first 6 months. Apply by October 31, 2020.
Tangerine Money-Back Credit Card
19.95%
1.95% for the first 6 months (then 19.95%)
3%
$0
$12,000
Earn 2% cash back in two categories of your choice (or three categories if you open a Tangerine Savings Account and directly deposit your cash back into the account), and 0.5% cash back on everything else.
Get a 1.95% interest rate on balance transfers for the first six months (valid within the first 30 days of account opening).
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Compare up to 4 providers

*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

Fees

Balance transfer card termsAnnual fee
An annual fee is a yearly fee you pay to your credit card company for the ability to use your card.

Balance transfer fees

Most providers charge balance transfer fees when you initiate balance transfers. Typically, these fees are between 1% to 3% of the amount you transfer, however sometimes it can be up to 5%.

Cash advance rate

Taking out a cash loan from your credit card is called a cash advance and costs significantly more than you’d pay if you were to simply swipe your card to make purchases. You’ll likely pay a transaction fee and pay around 22% or more in interest, often with no grace period to pay off before you’re charged. This means you will pay interest from the moment you withdraw the money.

Foreign transaction fee
A foreign transaction fee is a fee assessed when you use your credit card for a purchase outside of Canada. A card’s foreign transaction fee is usually between 1 – 3% of the transaction amount in Canadian dollars.

Late fee

You may be charged a late fee when you miss a payment or fail to pay your minimum balance by the due date.

Interest

APR

APR stands for annual percentage rate – the interest rate that’s charged to the debt. The APR is how credit card providers make money by lending you money. It’s applied each month to the remaining balance on the card.


Introductory APR

An introductory APR, also called an intro APR, is a temporary interest rate a credit card provider offers to a new customer. After the intro APR ends, it will revert to an ongoing APR.

Ongoing APR

The ongoing APR, also known in some regions as the revert rate, is the interest rate you’ll pay after your introductory APR period ends. Generally, the ongoing APR is much higher than the intro APR.

Penalty rate

The penalty rate or default rate, is a very high APR charged when you violate the terms of your cardholder agreement, such as making late monthly payments.

Bottom line

If you’re looking to save money on your credit card payments, finding the right balance transfer credit card for your needs is one way to help you get out of debt. And remember, understand the risks and fees that are associated with opening new credit cards and transferring balances before you dive in.


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