A balance transfer is a result of moving all or part of your existing debt to another card provider or lender, typically to save money on the overall interest you’d pay on that debt.
With your standard high-APR card, the majority of your monthly payment first goes toward the interest you’ve accrued on your purchases — the rest is applied to the purchases themselves. Balance transfer cards offer new customers the opportunity to transfer most types of debt to a new card with a low or no intro APR, buying some breathing room to more wisely budget their finances.
Balance transfer fees
Many balance transfer credit cards charge a fee to move your existing debt to the card — typically 1% to 3% of the balance you’re transferring. Depending on how large your existing debt is, the interest you’ll save by moving your debt to a 0% balance transfer card could far outweigh this fee.
How does a balance transfer work?
A balance transfer credit card is much like your typical credit card. But it comes with an opportunity to transfer high-interest debt to a new card, offering a lower rate on those transfers for a limited time. In this way, your new credit card helps you pay down your old debt — or pay it off completely.
When you apply for a balance transfer card, you’re asked to list your creditors and the amount you want your new card provider to repay them.
If you’re approved for the card, the amount that’s ultimately repaid to your old creditors is determined by the credit limit on your new card. Solid creditworthiness typically results in a higher limit — and therefore a bigger bite out of your owed debts. But you’ll find plenty of balance transfer cards that accept those with poor credit too.
Did you know?
When applying with a new card provider, you can give them an idea of how much you’re hoping to transfer. It’s only after you’ve been approved for the credit card that you can complete those transfers, typically within a certain period of time. Make sure you read the fine print to know how many days or months you have to get it done.
Once you’re approved, the credit card company then pays off the creditors you listed on your application. If you don’t qualify for the total amount you requested for repayment, your creditors are paid off in the order listed on the application, stopping when your credit limit is reached, less any fees per transfer. If you plan to transfer debt after you’re approved, you can typically call your credit card provider or initiate your transfers online.
What can I do with my balance transfer credit card?
Balance transfer credit cards offer the following benefits:
Save money. A low interest rate keeps more cash in your pocket, slashing unnecessary interest on purchases made long ago.
Get out of debt faster. Low interest allows you to pay down your debt more quickly, applying more of your monthly payment toward your principal balance.
Simplify your finances. Transferring the balances of multiple debts can consolidate many monthly payments into just one bill.
Help out with a partner’s debt. Some card providers allow joint balance transfers that can help you lend a hand to a struggling loved one.
Take advantage of balance transfer checks. Balance transfer cheques are like blank cheques you write to creditors or yourself to put cash in your checking account. How much you’re able to transfer with these cheques depends on your approved credit limit.
Shop around for other promos. Some people game balance-transfer promotions by moving their debt from one card to another at the end of an intro rate, effectively keeping the 0% balance transfer rate going for higher debts. Of course, you’ll need a good handle on your finances and a strong credit score to rely on this tactic.
How much you can transfer and the APR you’re ultimately offered largely depends on your credit score. You typically need a good to excellent credit score of 650 or higher for the most competitive balance transfer cards, like those with low rates, long intro periods and high credit limits. However, you’ll find decent options for people with fair or poor credit at a score of at least 580. As mentioned above, there are only a couple of cards in Canada that offer 0% interest rates on balance transfers. Other cards offer promotional interest rates as low as 1.9% and no annual fee.
If you have a very good or excellent credit score of 720 or higher, you’ll see approval for nearly any balance transfer credit card out there. Another bonus of good creditworthiness: longer low-interest intros and average everyday APRs of 12.99% or lower.
Consider the card below for customers with excellent credit of 720 or higher.
American Express Simply Cash Credit Card — Amex allows you to transfer up to 50% of your credit or $7,500 onto your new card for only 1.99% APR for the first six months. What’s more, this card is also a rewards card and offers cash back on gas, groceries and restaurants.
Good credit provides a wide range of options for balance transfer cards. If your score is 670 to 720, consider the card below.
Scotiabank Value Visa Card— Offering 0.99% APR for the first six months, this card has an annual fee of $29. After the first six months, interest hits only 11.99%. Other benefits include discounted car rentals and an additional supplementary card.
MBNA Platinum Plus MasterCard — No other credit card in Canada offers a promotional term of as long as 10 months with 0% APR. There is a 1% or $7.50 (whichever is greater) balance transfer fee. This card also offers car rental insurance, trip insurance, price protection and extended warranty protection.
RBC Cash Back MasterCard — With no annual fee, this card offers 1.9% promotional interest on balance transfers of up to 10 months. There is also a 0% balance transfer fee. You may also be able to get this card with a good credit score.
Best Western MasterCard — With 1.99% APR for ten months and no annual fee, this card can often be secured with fair to good credit. After the first ten months, interest hits 21.99%. There is a 1% balance transfer fee or a $7.50 charge. You also get a free nights stay in a Best Western Hotel as a bonus welcome.
Can a balance transfer affect my credit score?
Yes. A “hard pull” on your credit report is part of how a provider determines whether to take you on as a borrower, so applying for a balance transfer card can reduce your score. To minimize hard pulls, narrow down your options to only those cards you’re highly eligible for.
Other factors that affect your credit score are related to the card itself, including the total amount you’re transferring, your new available credit limit and whether your transferred balances will pay off a debt or account in full.
But you could find that a balance transfer credit card slightly your creditworthiness. This is because of something called your credit utilization ratio, or the amount of your debt on one card compared to that card’s spending limit. Putting this into action, if you currently owe $2,000 on a card with a $4,000 limit, transferring that balance to a card with an $8,000 limit could minimally improve your credit by lowering your utilization ratio from 50% to 25%.
A general rule of thumb is to keep your credit card debt to 30% or less of your limit.
Continuing to pay down your debt at your current rate is certainly an option. Here’s what it can look like if you stay on the same path.
Mistakes to avoid with a balance transfer
Like most financial tools designed to help those in debt, balance transfer credit cards aren’t without a few risks. Steer clear of these common pitfalls when you make your next balance transfer.
Neglecting to make payments. Don’t let a 0% APR trick you into thinking a card comes without costs. You’ll need to pay your minimum each month — preferably more — to repay your debt before the intro expires.
Ignoring the revert rate. At the end of your promo APR, you’ll pay the revert rate on any remaining balance. Look for a revert rate that’s lower than your current card’s rate to avoid ballooning debt.
Racking up APR penalties for late payments. To avoid losing your 0% intro APR, you must pay your minimum with your statement each month. If you struggle to make on-time payments, consider a card that won’t charge you penalty rates.
Paying high APR on cash advances. Most cards don’t extend a promo APR to cash advances. Because cash-advance APRs are among the steepest out there, avoid them altogether.
Forgetting about late fees on old cards. Depending on your provider, it could take up to 14 days for your balance transfers to complete. Don’t stop payments on your old cards until you know they’re closed. The last thing you need when dealing with debt consolidation is shelling out cash for fees.
Using your card for new purchases. With a balance transfer credit card, the primary goal is paying off your debts more quickly while saving on unnecessary interest. One way to avoid building more bulk into your balance is by avoiding new purchases on your card.
How do I apply for a balance transfer credit card?
Applying for a balance transfer credit card is just like applying for any other card, only you’ll list your creditors and the amounts you wish to pay to each. Eligibility varies by provider but is typically open to permanent residents of Canada who are at least 18 years old.
After you’ve confirmed your eligibility and weighed the APRs, intro periods and fees of all your options, complete your balance transfer credit card application with your personal information and financial details, carefully reading the terms and conditions before submitting it.
Do you still need to make payments on a 0% balance transfer card?
Yes. To avoid losing your 0% intro rate, you need to repay the minimum amount due on your card monthly.
How do I apply for a balance transfer credit card?
Applying for a balance transfer card is much the same as applying for any other credit card. The only difference is that you’ll complete a separate section of your application dedicated to balance transfer. Here, you’ll provide your creditors’ information, account details and how much of your old debt you’re looking to pay. If your application is approved, your debt is automatically transferred to your new card. But you’ll need to contact your old bank to close your existing accounts once your transfers are complete.
What is a balance transfer fee?
It’s a one-time fee you’re charged when you move a balance from your old card to your new account. Added to your balance, this fee is typically 1% to 3% of the amount you’re transferring. It can also be a specified amount, for example $7.50.
Can I transfer balances online?
With most providers, yes. It’s a convenient and simple way to make transfers. Check with your bank to see if it allows for online transfers.
How long will it take for my lenders to receive my payments?
While a few providers offer transfers completed in just a few days, it can take anywhere from one to three weeks. To avoid late fees and other penalties, make sure your old debt is fully paid before you top payments to that card.
Can I make a balance transfer with my current provider?
Generally, you can’t conduct a balance transfer from one account to another under the same bank. If you’re unsure, talk with your provider about the option for transfers.
Will I earn rewards on my balance transfer?
No, it’s not likely. Rewards on balance transfers vary by lender, but most will not allow you to earn rewards on your transferred amounts. Review the terms and conditions for the specific card you’re considering to learn more. There is currently only one card in Canada that offers both balance transfers and rewards.
What happens if I don’t pay off my balance before the end of the promotional period?
Any remaining balance left at the end of the introductory period — including the original balance transfer — reverts to a higher APR. To get the most out of your balance transfer card, make all efforts to pay off your balance during your promo period.
Are there any hidden fees or catches with a balance transfer card?
All of your potential fees and rates should be available in relevant disclosure documents for your card. Keep an eye out for balance transfer fees, the revert APR you’re charged at the end of your promo and any annual fees you’ll pay to use the card. Make sure these fees aren’t more than your potential savings before applying.Back to top
Adrienne Fuller is the head of publishing at Finder. With a decade of experience creating guides in finance and education, she aims to deliver the accurate and transparent information she wishes she had when she made some of life's important financial decisions. For the past 3 years she has been the publisher of money transfers, helping readers save when they send money all over the globe. She has a BA from Colorado College and loves to hike with her two Catahoula dogs around her home in San Diego.
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