A balance transfer credit card lets you move your existing debt — other card balances, medical payments, student debt and even personal loans — onto a new card with a lower rate, sometimes as low as 0%.
That lower rate runs for a fixed time, typically from six to 12 months, after which the interest reverts to a higher rate.
During that intro period, you can make some serious headway in paying down your debt with the bonus of simplifying your many bills to just one.
You’re typically required to pay a one-time fee to transfer your balance with these cards, often a percentage of the amount you’re transferring to the new card. In Canada, this is generally between 1-3% of your total debt. You may also be liable to pay an annual fee.
But a lower APR can result in significant savings. You should note that there are not many options for balance transfer cards in Canada. In fact, at any given time, there are generally only a couple of cards that offer 0% interest rates on balance transfers and these rates generally apply for 12 months or less.
Look how easy it can make paying down your debt:
1. Find a balance transfer card that meets your needs.
2. Confirm how much you’re eligible to transfer.
3. Submit your application and transfer amount.
4. Wait five to seven days for application approval.
5. Confirm your transfer — and start saving.
Credit card issuers make money when you pay interest, so why would they charge 0% when they could charge 24% or more?
The card eventually reverts to a higher rate. Failing to pay off your entire debt during the 0% intro period will leave you with the standard interest rate for your card. Once that happens, your new credit card issuer can potentially make hundreds or even thousands of dollars off you in interest.
Persuading you to switch is tough. Many users are reluctant to switch banks, and merely acquiring a new customer can cost a provider hundreds of dollars. Offering a discounted interest rate is one of the cheapest ways for banks to woo potential customers. Simply put, these cards are a cheap form of marketing.
Kick your debt to the curb with a balance transfer credit card offer
The average credit card APR is 16% in Canada, which is a lot of unnecessary interest on purchases you’re trying to pay off. Transferring that debt to a new card with a lower intro rate could be a solution to paying it off faster.
What’s in this guide?
Our guide empowers you to determine if transferring your credit card balance is the right solution for your budget and needs.
A balance transfer is the 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.
A 0% interest balance transfer card can offer six, 12 and sometimes more interest-free months. Your full monthly payment is applied to paying down your total debt, saving you a lot of money in the long run and keeping more of your money in your pocket, and not the provider’s.
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.
More about balance transfers
You can sometimes transfer more than just credit card debt to your new card, including auto loans, medical bills and student debt. This will depend on the credit card company.
Most providers post your transfers within two to three business days.
0% APR intro periods are at their longest in years, resulting in bigger potential interest savings for you.
To keep your 0% APR offer to its last eligible day, you’ll need to make at least your minimum payments each month on time. Setting up autopay can help keep you on track.
Good creditworthiness is required for the best balance transfer cards. But if you shop around, you can find solid balance transfer credit cards for those with poor credit.
How do balance transfers 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 are the benefits of a balance transfer credit card?
Saves you money. A low interest rate keeps more cash in your pocket, slashing unnecessary interest on purchases made long ago.
Gets you 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.
Simplifies your finances. Transferring the balances of multiple debts can consolidate many monthly payments into just one bill.
How much can I save by moving my debt?
Where does my credit score come into play?
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 12 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 merely applying for a balance transfer card can shave anywhere from 5 to 20 points off 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.
Consider each feature of a balance transfer credit card to make sure you prioritize what’s important against your immediate and long-term needs.
What to Expect
The intro APR is charged on any balance you transfer to the new card. Your APR is determined by your creditworthiness, but a good intro APR is 0% for a specific period.
Length of promo
You’ll find low-APR balance transfer offers that last from 6 to 12 months — and sometimes longer — depending on the card. Consider the APR, the size of your debt and the promo period to calculate whether you can repay your balances before your revert rate kicks in.
6, 10 or 12 months generally
When the promotional offer expires, your interest rate often reverts to a much higher APR — sometimes higher than average. Confirm your revert rate before applying.
Often 20% or more but may be as low as 11.99%
Balance transfer fee
Many cards charge a fee that’s from 1% to 3% of the total amount you’re transferring. Weigh it against your potential savings, and shop around for the lowest fee.
No-fee cards exist, but you’ll typically find fees of 1% to 3%. Ask about how to waive the fee.
What can I do with my balance transfer credit card?
The main purpose of a balance transfer credit card is to consolidate existing debt. But there’s more you can do with it beyond one-time transfers.
Take advantage of balance transfer checks
Though they’re quickly going the way of the dodo, balance transfer cheques are a feature that at least a few card providers use to entice you to apply. They’re much 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. And because the amount you transfer then becomes a balance on your card, you’ll want to be careful to pay it off before your low-interest period expires.
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. If your provider won’t allow it, look into adding your friend or family member as a secondary cardholder, holding on to the card until the balance is satisfied.
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% party going for higher debts.
An easy way to make a go of the game is to set a reminder for at least two months before your intro expires. At that point, you can begin shopping around for another balance-transfer card, applying early so that it’s ready when you need it. Of course, you’ll need a good handle on your finances and a strong credit score to rely on this tactic.
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.
Pro tip No. 1: Avoid using your new card for purchases.
With a balance transfer credit card, keep your primary goal in mind: 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. It’s not just that you’re adding new debt on top of old. But that newer debt will likely accrue higher interest for a longer time.
Here’s why: Your 0% intro APR likely won’t extend to new purchases. Worse, if your card is like most, your monthly payments will first go to paying off debts with the lowest interest. A good idea in theory, it means that your monthly payments will first apply to the balances you transferred to the card initially. Unless you’re paying a lot more than your minimum, you might inadvertently give your newer balances more time to accrue interest at their higher rates.
Pro tip No. 2: Make more than the minimum repayment.
If you’re paying only your minimum each month, you likely won’t be able to repay your entire balance before the end of your 0% or low balance transfer offer.
To avoid getting stuck with your revert rate, know how much you need to repay monthly to satisfy your full balance before your promo period expires. To calculate your repayments, divide the amount of your debt by the number of months in your balance transfer offer. Use this amount as your repayment goal for each statement period.
Here’s how you can pay off a $10,000 debt over a range of repayment periods:
Percentage of total required monthly to clear $10,000 debt
Monthly repayment amount on a $10,000 debt
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.
Recently applied for a balance credit card and not sure about your status?
Call your credit card provider’s customer service line to learn whether you’re approved or rejected — and, importantly, why.
Yes. To avoid losing your 0% intro rate, you need to repay the minimum amount due on your card monthly.
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.
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.
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.
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.
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.
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.
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.
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.
While the card may offer 0% APR, you’ll still need to make minimum payments monthly. Ideally, you’ll want to pay more than the minimum to make sure your entire balance is repaid before the promotional period ends.
Balance transfer leverage, also known as credit card arbitrage, is a legal scheme in which you borrow money from your credit card and invest those funds in another loan that returns higher interest than you’re paying to maintain it.
For example, you’d borrow money from your credit card and invest that money in a CD or high-yield savings account. You’d then make the minimum monthly payments on your card until the promotional 0% APR expires, at which point you’d withdraw the money, pay the balance in full and profit from any remaining difference.
While it sounds like an easy enough way to make extra money, there are risks. Making a wise investment decision is difficult in today’s market, and people who are successful in arbitrage are typically investment professionals. These schemes also encourage bad financial habits by leaving you with debt that can exceed the recommended credit card utilization ratio, possibly damaging your credit score.
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