If you’re carrying debt on an existing credit card, chances are you’re paying plenty of money in compounding interest fees. A high interest rate can have you trapped in debt far longer than desirable, and if repaid over an extended period of time, can leave you paying more money in interest fees than your debt load.
This is where a balance transfer credit card can come in handy. With low or zero interest for a specified period of time, you can get a handle on your debt and focus on paying it off without incurring interest. A credit card with no annual fee or the annual fee waived for the first year only sweetens the deal and maximizes your savings. If you put these savings towards repaying your debt, you’ll be debt free sooner.
Compare balance transfer credit cards with no annual fee
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What is a credit card with a $0 annual fee and 0% intro APR on balance transfers?
Important consideration: Is the annual fee the right focus?
While it’s nice to find a balance transfer credit card that offers both a $0 annual fee and a 0% intro APR on balance transfers, the annual fee might not be as big of a deal as you think.
Let’s say you have $10,000 of debt on a credit card with an APR of 18% and no annual fee, and you can only afford to make monthly payments of $500. At this rate, it will take you 24 months to pay off your debt, and you’ll pay $1,996 in interest.
You’re considering transferring the debt to one of these balance transfer credit cards to take advantage of its 0% intro APR on balance transfers. One comes with an annual fee of $49, while the other has no annual fee:
Balance transfer credit card 1: $0 annual fee; 0% intro APR on balance transfers for 6 months, then 15% APR; 3% balance transfer fee
Balance transfer credit card 2: $49 annual fee; 0% intro APR on balance transfers for 12 months, then 15% APR; 3% balance transfer fee
If you were to go with balance transfer credit card 1 that offers no annual fee and continued making monthly payments of $500, it’d take you 22 months to pay off your balance with $1,043.64 in interest and balance transfer fees. You’ll pay off your debt two months faster and save $952.36 in interest.
However, let’s look at what would happen if you were to go with balance transfer credit card 2 that has a $49 annual fee. By making monthly payments of $500, you could pay off your debt in 21 months and pay $639.48 in interest, annual fees and balance transfer fees. Even with those two years of annual fees, you’re still saving money on interest compared to both other credit cards and also paying off your debt faster.
In this case, having to pay an annual fee was offset by the longer 0% intro APR on balance transfers. Keep this in mind before placing too much emphasis on whether a balance transfer credit card has an annual fee or not.
How to compare balance transfer credit cards
When it comes to comparing cards, these are the major factors to consider:
Annual fee waiver. Some cards offer no annual fee for the entire life of the card, while others only waive it as a promotional offer. In the latter case, you should know when the annual fee will kick in and how much it will cost you each year. Some providers may not waive the annual fee at all.
Balance transfer period. Consider the length of the promotional offer, such as 0% interest for 3 months vs. 0% interest for 6 months. The interest fees saved over a longer period of time can be substantial. Make sure that you can repay your entire balance before the promotional period ends, otherwise your remaining balance will collect interest at the revert rate.
Revert rate. The revert rate is typically the high-interest purchase or cash advance rate that kicks in once the promotional period ends. This is particularly important if you’re uncertain that you’ll be able to pay off all of your debt within the promotional period.
Balance transfer fee. This is a one-time fee that you may have to pay to move your balance over to the new card. There are credit cards that omit this fee, but some cards charge between 1% to 3% of your balance transfer amount, which could mean a fee of $300 on your $10,000 debt. This is usually a small amount compared to the interest fees you will save, but should be factored in.
Balance transfer amount. Some credit cards will allow balance transfers up to 100% of your new credit card limit, while others may impose a balance transfer limit. Some cards, for example, only let you transfer a balance up to 70% of your card limit while others may set a specific dollar amount as a limit.
Purchase rate. This is the interest rate for new purchases made on the card. Be careful about making new purchases on your balance transfer credit card because you will not be eligible for interest-free days when carrying an outstanding balance and all repayments will go directly to your purchases if it’s collecting the higher interest rate.
Cash advance rate. Cash advances, such as ATM withdrawals, usually carry a higher interest rate of around 22.99%. Cash advances collect interest immediately and often incur a cash advance fee too, so you might want to avoid them if you’re trying to save on interest and pay down your debt.
Other features. Consider other card features like the complimentary extras that may be offered, as well as the ability to earn rewards points on the card. Complimentary extras often include travel insurance coverage and purchase protection policies. While you shouldn’t be using the card to make purchases or earn reward points while paying down a balance transfer, these features could be of interest if you plan to continue using the card after your debt has been repaid.
What are the benefits of $0 annual fee 0% balance transfer cards?
0% interest. Take advantage of 0% interest on the transferred amount. Not only will this allow you to save plenty of money on interest fees, it will also allow you to repay your debt faster.
Competitive rates. Competitive interest rates and fees can allow you to manage your finances with greater ease during the balance transfer period.
Credit improvement. If you have multiple debts across a number of cards, this can reduce your credit score. If you transfer the debt to a single card and reduce the overall amount, this could help repair your credit history over time.
What are the features of a $0 annual fee 0% balance transfer card?
Reward programs. While consolidating your debt is a big enough incentive for most, the added advantage of a rewards program can make the card a must have. Reward points can be earned on any eligible purchase and can usually be used toward merchandise, travel, experiences and more.
Complimentary travel insurance. Some credit cards offer complimentary travel insurance which can be useful for customers who are planning an overseas trip in the near future.
Interest-free days. Many credit cards provide interest-free periods on purchases, with grace-free periods sitting between 21 and 55 days, depending on the card.
Low or zero transaction fees. Some cards also provide low or zero exchange and currency fees on foreign transactions. This could be useful for frequent travellers.
Before applying for a no annual fee 0% APR balance transfer credit card, compare your options to find a card that is best suited for your financial needs and spending habits. Once you’ve compared your options and decided which card you want, you can apply online. You can usually complete your application within 10 to 15 minutes, as long as you have the necessary information handy. More importantly, you must meet the card’s eligibility criteria to successfully apply.
While it can differ between credit cards, you will usually need to meet the following:
Age. You must be at least 18 years of age, or the age of majority in your province or territory.
Residential status. You must be a Canadian citizen or a permanent resident with a valid Canadian address.
Annual income. You may need to meet minimum income requirements in order to apply for the card.
Credit history. You must typically have a clean credit history and a good to excellent credit score of 650 or higher.
Necessary information and documents
Proof of identification. Provide a copy of your driver’s license, passport or other form of valid ID.
Financial information. You may need to provide bank statements and information regarding your debts.
Employment details. You’ll be asked to provide details of your current and previous employment, as well as your employers contact details and sometimes recent pay cheques. If self-employed, you may be asked for your most recent tax return and other proof of income. If you’re retired, you will likely need to provide proof of Pension and OAS payments.
Assets and liabilities. The application may ask for details of your assets, liabilities and expenses.
Credit limit and balance transfer. You will need to provide details of your requested amount to balance transfer, including account details of your current credit cards from which you wish to transfer your balances from.
Finding a credit card that offers both a $0 annual fee and a 0% APR on balance transfers can help you pay off your debt faster while avoiding unnecessary interest and fees. Still, you may not want to place too much emphasis on whether a balance transfer credit card comes with an annual fee, as the savings in interest with a longer 0% intro APR offer can outweigh the costs of annual fees in many cases.
Before applying for a balance transfer credit card, compare your options to find the best card for your financial situation. When choosing your new card, it is advisable to forecast a strict repayment schedule to ensure that you can successfully pay off your full debt within the promotional 0% APR period offered by the card. Make sure your savings on the new card outweigh all possible future fees, so that the balance transfer ultimately proves cost effective and worthwhile for you.
Yes, a balance transfer will cause your credit score to take a small dip. This is because applying for a new balance transfer credit card will result in a “hard pull” on your credit report, which usually drops your score five or so points. However, after the initial dip, you may see your credit score improve as you pay off your debt and your credit utilization ratio decreases.
It depends on the provider of your balance transfer credit card. Some providers can complete transfers within a few days, while others may take between two to three weeks, sometimes longer. Make sure your old debt has been fully paid before stopping payments on that card or attempting to close it. Otherwise, you could incur late fees and your credit score could take a hit.
Once the low or 0% intro APR period comes to an end, your balance reverts to a higher APR. In order to get the most out of your balance transfer promotional period, try to pay off as much of your balance as you can before the intro period ends.
This varies between credit cards. Some providers will limit your balance transfer to a maximum percentage of your credit limit – for example up to 70% of your credit limit – or set a maximum dollar amount. Some providers will set both and allow you to choose the lowest or the highest of the two options.
For example, if you’re approved for a credit limit of $10,000 and can use up to 70% of your limit for balance transfers or transfer a maximum of $7,500 (whichever option is lower), this will allow you to transfer $7,000 in credit card debt over to your new balance transfer credit card.
In theory you could do this, however most balance transfer credit cards in Canada have a low intro APR period for 6-10 months, which likely won’t be enough time to pay off your car loan – however it will depend on how much you owe. What’s more, the lowest balance transfer APR you will likely find is around 0.99%, which again will only last for a few months tops.
You should take a hard look at your finances to make sure you can repay the debt within this intro period. Otherwise, you could get sucked into a vicious cycle of paying one debt with another.
Adam Mayhew is a writer for Finder, specialising in video games and TV. He's been the editor of magazines such as Ultimate Nintendo and Official PlayStation AU. His words may also be found in IGN, Gamespot, Kotaku, Red Bull, Game Informer and AusGamers.
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