What are balance transfer credit cards?

Balance transfer credit cards let you move your debt from your existing credit card over to a new card with a lower interest rate. You can also move several balances from several different cards at one time if you want to consolidate your debts all in one place. Just be aware that you’ll have to pay a balance transfer fee that’s usually worth between 1% and 3% of the amount you wish to transfer.

The promotional interest rate you can get with a balance transfer credit card typically ranges between 0% and 3.5%. This intro offer usually lasts for a period of between 6 and 10 months and doesn’t usually apply to purchases you make on your card. Once the promotional period is over, balance transfer credit cards typically revert to an interest rate of between 8.99% and 19.99% for your total balance.

How do balance transfer credit cards work in Canada?

Balance transfer credit cards work as a catch-all for all of your credit card debt. You can transfer all of your outstanding balances over to them to pay off your debt at a lower interest rate. This low interest rate will typically only apply to your transferred balance and not to any new purchases you make. Some balance transfer credit cards also allow you to earn rewards on purchases, though none offer rewards on transferred balances.

Here’s an example of how much you could save while paying off a $3,000 credit card balance over a 9-month introductory period with a balance transfer credit card versus a normal card.

This example shows that you could save $25 per month and $140 in total interest and fees by switching to a balance transfer credit card.

How much can I transfer with a credit card balance transfer?

The amount of money you can transfer with a credit card balance transfer depends on which provider you use. Some balance transfer credit card providers will expect you to transfer a minimum amount over to your new card (usually between $100 and $1,000).

The maximum amount you can transfer with a credit card balance transfer usually sits somewhere between 70% and 100% of your approved credit limit. So, for example, if you have a $3,000 credit limit on your new balance transfer card with a 90% transfer limit, you would be able to transfer a balance worth up to $2,700. You can find out more about minimum and maximum transfers by contacting your provider directly.

How do interest rates work with balance transfer credit cards in Canada?

There are usually three types of interest rates you need to be aware of with balance transfer credit cards in Canada:

1. Promotional rate. Promotional rates often fall between 0% and 3.5% interest and typically last between 6 and 10 months. During this time, you’ll pay extremely low interest on any balance you transfer over until it comes time for your rate to revert. You usually won’t be able to extend your intro offer at this point.
2. Revert rate. The revert rate is the interest you’ll pay when your promotional rate expires. The revert rate for balance transfer credit cards in Canada usually falls between 8.99% and 19.99%, depending on what type of card you have. You’ll have to pay this rate for any leftover balance you haven’t paid off.
3. Purchase rate. You’ll typically be required to pay high interest rates (usually around 19.99%) for any new purchases you make on your credit card. This is why most people use balance transfer cards to pay off their transferred debt quickly rather than to make purchases.

Can I transfer my balance to a new card when my promotional offer expires?

You can typically make a second balance transfer to another card as long as it’s not with the same card issuer. This is referred to as “balance transfer kiting” and is a common practice (though it comes with some risks).

• Risk #1: Balance transfer kiting can lead you to accumulate higher debts if you don’t pay your balance off during the promotional period.
• Risk #2: Transferring your debt over to another credit card can hurt your credit score since it requires a hard pull on your credit for every new card you apply for.
• Risk #3: You may not get approved to transfer your entire balance, which can require you to make multiple payments across several credit cards.
• Risk #4: You’ll have to pay a balance transfer fee every time you transfer money, which can eat into any money you save with lower interest rates.

You may want to look into this option if you’re close to paying down your debt, you have a good credit score and you can afford to pay a second balance transfer fee.

Compare balance transfer credit cards

What is a credit card balance transfer fee?

A balance transfer fee is a charge from your credit card company, typically between 1% and 3% of the transferred amount, however sometimes it can reach as high as 5%. This fee allows you the convenience of transferring your outstanding debt or debts to a new credit card that likely has a promotional period offering little to no interest for anywhere from 6 to 12 months, or sometimes even up to 15 months. The money you save on paying a lower interest rate can then be used to make larger payments to help get you out of debt faster.

How balance transfer fees are calculated

A balance transfer fee is charged when transferring your existing credit card debt to a new credit card. It’s generally 1% to 3% of the total balance being transferred, but can reach as high as 5%. Usually this fee is set at a minimum amount, and you’ll be required to pay the larger of the two. For example, whichever is greater of either $5 or 3% of the amount of each transfer. If 3% of the amount you are transferring is less than $5, then you will be charged $5. Few banks will put a maximum cap on the transfer fee – most only set a minimum fee.

If you’re wondering what fee you’ll be charged to transfer a balance, check the relevant Terms and Conditions of the credit card and you should be able to locate your answer under the “fees and rates” section. If you’re still unsure, contact the provider’s customer service team to confirm what you’ll be expected to pay.

Is a balance transfer credit card a good idea?

Ask these questions to find out if a balance transfer is a good idea.

1. Is your interest rate making it difficult to pay down your balance?
   You could benefit from a balance transfer card if you’re paying a standard 19.99% interest rate on your outstanding balance.
2. Can you repay a significant amount of your debt in the promotional period? It could make sense to get a balance transfer card if you think you can repay a significant amount of your debt in your first 6 to 10 months of card ownership.
3. Will you be able to transfer all of your debt? You may want to pursue a balance transfer if your institution will allow you to transfer all of your debts over at one time. If your credit limit is small on your new card, you may only be able to transfer a portion of your debt – which can make repayment more difficult to manage.

4. How much will you actually save with a balance transfer?Balance transfers can come with fees, usually from 1% to 3% of the amount being transferred. The fee, intro rates, long-term APRs, introductory period and your budget should be considered when you’re calculating potential savings.

5. Do you have a good enough credit score to qualify? You may need to have a credit score of 650 or higher to qualify for a balance transfer card. You should check with the institution you want to apply with to make sure you’ll meet their eligibility requirements.

Pros and cons of balance transfer credit cards

How to choose the right balance transfer credit card in Canada

Compare the following features to find the right balance transfer credit card for your needs.

• Length of promotional balance transfer offer. Most promo interest rates are available for 6-10 months. Find the card with the lowest promotional rate for the longest term.
• Balance transfer fees. Balance transfer fees typically range between 1% and 3% of the total amount of debt you’re transferring. Look for a fee that suits your budget and doesn’t drastically cut into the amount you’ll save on interest by switching.
• Annual fees. Some credit cards have annual fees ranging from $0 to $150. Look for a card that comes with no annual fee or promises to waive the fee for the first year.
• Balance transfer limit. Check your balance transfer limit and make sure the amount you want to transfer is below this number. Otherwise, you’ll end up with a large balance spread across multiple credit cards.
• Revert interest rates. Find out how much interest you’ll have to pay when your promo offer runs out. Search for a card that reverts to a low interest rate (between 8% and 14%) if you want to keep saving money when your promo rates expire.
• Penalties. Some credit cards may enforce harsh penalties if you miss a payment, including eliminating your promotional rates altogether. Make sure you read the fine print before you sign up for a card.
• Rewards and benefits. Most balance transfer credit cards are designed specifically to help you pay off your debt, though some may offer rewards. Find out what rewards and benefits come with your new card before you make the switch.

Balance transfer credit card eligibility requirements

There are generally 4 eligibility requirements that credit card issuers look at to determine if you are approved for a balance transfer card:

1. Credit history and score.

Are you someone with a long credit history? Do you typically make payments on time? Do you have loans in default? The answers to these questions indicate to providers how you will behave as a future borrower. The better your score and payment habits, the less risky you appear to a provider — and the more money they will be willing to lend you. Higher credit scores generally mean your credit limit will be higher and you’ll have more credit card options.

2. Amount and type of debt.

The balances you owe on other accounts is another hard number credit providers consider to show if you will be able to pay back your debt. While carrying different types of debt won’t prevent you from being approved for a balance transfer card, it is a reflection of your spending habits.

The type of debt you have is another indicator of your ability to use credit responsibly. A student loan or home equity line with low payments and low interest that you consistently pay on time offers a stronger case for your reliability than three store credit cards with maxed-out limits.

3. Debt-to-income ratio

Your debt-to-income ratio (DTI) gives an indication of how much you can afford to pay towards a new debt every month. You can calculate a debt-to-income ratio by dividing the total amount of debt you pay each month by the total amount you make.For example, if you make debt payments totaling $1,100 every month and your monthly income is $4,000, your debt-to-income ratio is $1,100 divided by $4,000 — that’s 0.275 or 27.5%. So about a third of your income goes toward your debts. In general, credit card issuers want to see a DTI of no more than 15-30%.

4. Income

It may appear that income is covered in the debt-to-income ratio, but income is a significant factor on its own. For example, you may not have a large debt balance, but you could still be in a tight spot if your income is lower and your interest payments are relatively high.

How to apply for a balance transfer card

Most balance transfer card providers offer cards to applicants who are at least 18 years old and reside in Canada. While the exact information you’ll need to complete your application can vary by provider, you’ll likely need to submit the following:

• Your personal contact information.
• Your Social Insurance Number (SIN) and date of birth.
• Your residential status.
• Financial details, such as your annual salary and other income.

Some balance transfer credit cards in Canada allow you to request your balance transfers on the application itself. You will need to supply the following information if you want to do this:

• Account details for the debt you want to transfer.
• The amount you expect to transfer to your new card.

Compare and apply for a balance transfer credit card

How to do a balance transfer on your credit card

While the exact procedure to initiate a balance transfer may vary based on your credit card provider, you can usually follow the steps below to get started:

• Initiate a balance transfer request. Ask your new provider to initiate a credit card balance transfer for all of the cards you would like to transfer over.
• Provide account information for your old cards. Provide your new credit card issuer with account information for your old cards and specify how much of your balance you want to transfer from each card.
• Wait for the transfer to process. Wait several days or weeks for your credit card issuer to process your balance transfer and liaise with your old credit card providers.
• Continue to make payments on your old cards. Continue to make payments on your old cards until you get a confirmation that the transfer has gone through.

What should I do with my old cards after I initiate a balance transfer?

You may want to keep your old cards open once you initiate a balance transfer, even if you’re not using them anymore. This is because closing old cards can negatively impact your credit score for the following reasons:

• Causes your credit utilization ratio to go down. Your credit utilization ratio assesses the overall credit limit you have across multiple credit cards vs how much of that credit you’re using. If you knock out a couple of credit cards, your overall credit limit will go down even though your credit use will stay the same.
• Lowers the average age of your credit cards. The age of your credit cards also matters to the credit bureaus. They will give you a higher score for having older forms of credit (such as long-term loans, mortgages or credit cards). This is why it makes sense to keep your credit card open even if you’re done using it.

When should I close my old credit cards?

You may want to close your old cards if they are fairly new (less than a year old) or you don’t think you can avoid spending money on them if you keep them open. You may also want to close them if they come with annual fees that you don’t want to pay.

Will cancelling a credit card affect my credit score

Do balance transfers hurt your credit score?

Yes, they can hurt your credit score, especially if you open a credit card at the same time.

Many consumers who use balance transfers do so while opening a new credit card — for example, to take advantage of an introductory APR. Because of this, a balance transfer can indirectly affect your score in 3 main ways:

• Hard pull after card application.
  After you send an application, your provider will initiate a hard pull, which means it accesses your credit report to decide whether to lend to you. This can lower your score by 5-10 points, and potentially more. Many hard pulls within a short period of time can impact your score more severely.
• Average account age.
  When you open a new account, the average age of all your credit accounts goes down. In turn, this lowers your credit score slightly, often between 5-20 points. Lenders look at average account age because they want to see you’ve been working with credit for a long time.
• Credit utilization.
  Your credit utilization (how much you use the credit that’s available to you) matters not only across all of your cards, but also on individual cards. For example, you might have $20,000 in total credit. But if one card with a $2,000 limit is maxed out, lenders may still see that as a red flag. Transferring a balance can affect your credit utilization in a similar way. If your transfer takes up the vast majority of your new card’s credit limit, for instance, your credit score could decrease.

Could a balance transfer credit card help my score?

Yes. Getting a balance transfer credit card can help your credit score because of 2 factors:

• Utilization rate. Adding another card to your wallet comes with an additional line of credit. If your debt levels stay the same, adding another line of credit will lower your utilization rate, which positively affects your credit score.
• Paying off your balance. It’s best to use an interest-free period to pay off your debt. Once you pay off your balance, the lower debt levels will positively affect your credit score.

Keep in mind, moving your balance won’t erase your debt or your bad habits. Even if you close your account, anything that happened with the old account will remain on your credit report.

Your credit score may also move in a positive direction, albeit a small one. When you open a card, your total credit increases. Meanwhile, you haven’t taken on more debt. This lowers your credit utilization rate, which may increase your credit score.

How to prevent a balance transfer from negatively impacting your credit score

There are a few easy steps you can follow to protect your credit during a balance transfer:

• Don’t apply for cards too often.
  Try to spread your applications over periods of 6 months or a year. Applying for new cards over a longer period of time will have less of an impact on your credit file.

• Leave old credit cards open.
  After your balance transfer, consider keeping your old card open. If you close it, you’ll lower your average age of credit accounts. Plus, you’ll decrease your total credit. Both can lower your credit score.

• Review terms and conditions.
  Go through the balance transfer offer terms and conditions at the very onset. Account for all applicable fees — including annual and balance transfer fees — and calculate whether you can afford the card. Also, do your research to check whether you meet general eligibility requirements such as credit score, residency and minimum income. By applying only for cards you have a good chance of getting approved for, you can avoid unnecessarily losing points from your credit score.

• Pay on time.
  Making a late payment can result in the termination of the promotional balance transfer offer, so try to stay on top of your bill due dates. Also, consider setting up autopay. As you consistently make on-time payments, you’ll slowly see an improvement in your credit score.

• Keep your credit utilization low.
  Ideally, keep your balance on all of your credit cards below 30% of your credit limit. If a balance transfer puts your credit utilization over this amount, consider paying down the balance.

Bottom line on credit card balance transfer offers

You can save a significant amount in interest if you sign up for a balance transfer credit card. Just keep in mind that you’ll typically only save money on the balance you transfer over and not on new purchases you make on your card. Learn more about how credit card balance transfers work and compare balance transfer credit cards in Canada to find the right fit for you.

Balance transfer credit cards FAQs

• Can I apply for a balance transfer credit card with my current provider?

  No, you can't usually do a balance transfer from one account to another under the same bank or credit card provider – or any of their affiliate partners for that matter. That said, you may want to call your provider directly to find out more about their regulations.

• How long will it take for my balance transfer to process?

  You may need to wait several days or weeks for your credit card issuer to process your balance transfer and liaise with your old credit card providers. In the meantime, you'll need to continue to make payments on your old cards until you're notified that the balance transfer has been processed.

• Are there any hidden fees or catches with balance transfer credit cards in Canada?

  There shouldn't be. However, you should pay attention to your balance transfer fee, the revert interest rate you'll have to pay after the promo period and any annual fees that apply to your new credit card. You may also want to keep an eye out for late fees and account inactivity fees.

• What is the revert interest rate or APR?

  The revert interest rate is the rate you'll have to pay when your promotional rate runs out. This rate will usually sit around 19.99% for most credit cards. That said, you may be able to get a balance transfer credit card that reverts to a lower interest rate. For example, the CIBC Select Visa Card lets you transition to a rate of 13.99% after a 0% interest welcome offer.

• Will late payments affect my promotional balance transfer rate?

  You may lose your promotional rate if you default on a payment with your new card. On top of late fees, the credit card provider could also charge a penalty APR that can be upwards of 30%. You should make sure to read your terms and conditions to find out more about how your provider deals with late payments.

• Will applying for a balance transfer card affect my credit score?

  Applying for a balance transfer credit card can cause your credit score to take a small dip. This is because applying for a new card will result in a hard inquiry on your credit report, which usually drops your score by around five points. That said, this negative effect is usually only temporary and you can typically regain those few points with regular on-time payments.

• How can I find an easy approval balance transfer card?

  Two ways to narrow down your search for easy approval balance transfer cards are to find ones that openly list credit score requirements and allow you to get pre-approved for the card before lodging your official application.

  You can view your credit score by contacting one of the two credit bureaus – Equifax or TransUnion – or by using a reputable website that gives you access to your credit score.

  Pre-approval, which is sometimes called pre-qualification, essentially says that the provider accepts the information you've provided as being within at least some of its underwriting standards. However, pre-approval does not guarantee approval.

• Can I transfer balances from more than one card or account?

  Yes. You can transfer multiple balances from several accounts over to your balance transfer card. Just be aware that there may be limits on how much you can transfer so you should check with your provider to find out more about your credit limit and available balance transfer room before you apply.

• How to make a second balance transfer

  Follow these steps to transfer your debt from a credit card with a promotion that's about to end to a second balance transfer credit card.

  1. Pay off as much as you can before the balance transfer promotional period ends on your first balance transfer card.
  2. Compare balance transfer credit cards and carefully consider the length of the promotion and any fees on the card to determine whether it'll benefit you.
  3. Double check the eligibility requirements for the card you're interested in. In addition, make sure you haven't had a credit card from the provider that you're interested in – or one of its affiliate companies. You usually can't transfer your debt to a provider that you've already had a card with.
  4. Apply for a balance transfer credit card and enter your current credit card details when prompted by the online application, or call the number on the back of your new card once you receive it if you're not asked to balance transfer at the time of application.

  Keep in mind that your second balance transfer will be subject to the credit card provider's lending criteria. This includes a credit check that will show your previous applications and current credit accounts — meaning they'll see when you applied for your first balance transfer card. This could raise red flags for them, possibly resulting in rejection.

• How much could I save by making a second balance transfer?

  Let's say you have a debt of $14,000, which you move to a new card that doesn't charge a balance transfer fee and has a 0% intro APR on balance transfers for six months. During the promotional period, you're able to pay the debt down to $11,000. Now that it's over, you'll start paying a 19% variable APR.

  Here's how much you could save by transferring the balance again, assuming:

  • A 3% balance transfer fee is charged.
  • You're able to pay the debt down to $6,000 during the intro period.

  The balance transfer fee brings the total debt to $11,330. That means it would take $5,330 to pay it down to $6,000.

  Had you paid interest on the previous card during those six months, it would've run about $900. Meaning once you account for the balance transfer fee, the second transfer will have saved you about $570.

• When should I inform my new credit card issuer of my desire to transfer debt from other cards?

  You should ideally do this at the time of application, or soon after you find out about your new card's approval.

• Is there a limit to how much money I can transfer through a balance transfer offer?

  This varies from one credit card issuer to the next. Most providers will allow you to transfer 85-100% of your credit limit. Keep in mind the amount you transfer will affect your credit score, as mentioned above.