If you have debt across one or more credit cards, you could consolidate it to a single balance transfer credit card – and pay it off with 0% or low interest for a predetermined number of months. While you can save hundreds – or sometimes thousands – of dollars in interest payments, you’ll need to watch out for the one-time balance transfer fee. Read our guide below for everything you need to know about balance transfer credit cards to find out if it’s the right decision for you.
A balance transfer is the result of moving all – or part – of your existing debt to a new credit card provider, typically to save money on the overall interest you’d pay on that debt.
Balance transfer credit cards offer new customers the opportunity to transfer most types of debt to a new credit card with a low or 0% intro APR for a set period of time (usually up to 6-10 months). This provides some often much needed breathing room to help cardholders get their debt under control, and start paying down the principal much faster because more of each payment goes towards paying down debt.
Compare balance transfer credit cards
Let’s break down how balance transfers work
A balance transfer credit card allows you to move debts, like loans and credit card balances, to a new card with a lower interest rate. This allows you to pay off your balances faster and save money on interest.
Here are the steps to complete a balance transfer:
1. Compare and apply for a card
Look for balance transfer offers with the lowest rate possible (ideally 0%) for as long as possible (often 6, 12, or even 21 months if you have great credit). Submit your application.
2. Transfer the balance
Follow the instructions provided by the card issuer to transfer your existing balances to your new card.
3. Pay off the debt
Be sure to pay down the balance within the intro offer period, so you can save the most money on interest, get out of debt, and avoid any repercussions of the revert rate.
What will a balance transfer credit card cost me?
There are three main fees to keep in mind when it comes to considering a balance transfer credit card: APR, balance transfer fees and annual fees.
APR
Your purchase APR affects how much interest your balance accrues each month. If you have an APR of 19% and a balance of $4,000, you can expect to rack up an additional $63.60 a month in interest charges, assuming you make no payments. When you’re offered a 0% or low APR, you can put these savings towards paying down the actual debt.
Balance transfer fee
A balance transfer fee is a one-time fee that’s charged to transfer your debt to the new credit card. This fee is usually between 1% and 3% of the total amount transferred, though some balance transfer cards charge no fee as part of their welcome offer. Watch out for this fee – the cost can take away from savings you might get with a low or 0% APR.
Annual fee
You’ll need to take the annual fees of the credit card into consideration, as a high annual fee can add to the debt you already have. Some balance transfer cards come with no annual fees, while others might have annual fees into the hundreds of dollars.
Balance transfer repayment calculator
To help you through this process, use our balance transfer calculator to find out how much you could save by making a transfer.
How to calculate your balance transfer repayment
Here’s what the calculator is doing behind the scenes:
First, it adds all your existing card balances.
Then, it adds the fee you’ll pay for a balance transfer to the new card, as well as the new card’s annual fee (if applicable).
Lastly, it takes that total and divides it by the length of your new card’s intro APR.
If you were to do the math by hand, you’d use this formula:
(Total of existing card balances + Balance transfer fee of new card + Annual fee of new card) / Length of intro APR
When is a balance transfer worth it?
A balance transfer is worth it when the money saved on interest outweighs any balance transfer and annual fees.
Let’s say you owe $4,000 with an interest rate of 19% and you intend to pay $300 each month. Here are four common options for tackling this kind of debt:
Options for repaying credit card debt using a balance transfer credit card
Specs of original card Credit card balance: $4,000 Original card interest rate: 19% Annual fee: $0 Monthly payment: $500 Cost in interest: $329.45
Credit card: 0% apr, 3% transfer fee
Credit card: 1% apr, 1% transfer fee
Loan: 5% apr
Minimum payment of 3%
Interest
$0.00
$15.07
$212.00
$2,481.00
Transfer fees
$120.00
$40.00
$120.00
$0.00
Total cost
$120.00
$55.07
$332.00
$4,735.32
Time to pay off debt
8 months
8 months
24 months
19+ years
Savings
$209.45
$274.38
-$2.55
–$4,405.87
In this case, a balance transfer card with an APR of 1% and a lower balance transfer fee of 1% is the best option. Although the APR is higher than the 0% APR, the balance transfer fee savings make the card a slightly cheaper choice.
How do I compare balance transfer credit cards?
In addition to the APR and balance transfer fee, here are a few more factors to weigh when choosing a balance transfer card:
Revert APR
If you can’t pay your debt in full by the end of the intro period, any unpaid balance will begin to accrue interest at the revert rate. Depending on the card, you could face interest of 19.99% or higher – so budget wisely.
Penalties
Some credit cards may enforce harsh penalties if you miss a payment, including eliminating your intro APR period altogether.
Rewards
Most balance transfer credit cards are designed specifically to help you pay off your debt, though some may offer rewards, making them a decent ongoing choice after you’ve paid off your balance.
Annual fee
Some balance transfer credit cards come with annual fees. These can reduce your overall savings and prove a needless burden after you’ve paid your balance.
Scotiabank Value Visa Card
Scotiabank Value Visa Card
12.99 %APR
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
Scotiabank Value Visa Card
Apply today and enjoy a 0.99% introductory interest rate on balance transfers for the first 6 months.
Purchase interest rate: 12.99%
Cash advance rate: 12.99%
Intro balance transfer rate: 0.99% for the first 6 months
Benefits and things to avoid with balance transfer credit cards?
Saves you money. A low-interest rate keeps more cash in your pocket and slashes unnecessary interest on purchases made long ago.
Gets you out of debt faster. Low interest allows you to pay down your debt more quickly by 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.
While a balance transfer credit card comes with many benefits, be on the lookout for potential pitfalls when paying down your debt.
Applying too often. Each card application requires a hard pull of your credit report, which can shave several points off your score.
Paying less than the minimum. To pay down as much of your balance before your 0% promo APR ends, divide the amount you’re transferring by the number of months you have to pay it down.
Forgetting the offer end date. After your intro period ends, you’ll pay your approved revert rate on any remaining balances. Consider setting a reminder for a few months before your promo expires.
Racking up additional debt. A 0% intro APR balance transfer card is most effective if you use it to concentrate on paying down your existing debt. Because repayments are applied to new purchases first, you threaten your ability to pay off your transferred debt in time.
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 submit:
Your personal contact information.
Your Social Insurance Number and date of birth.
Your residential status.
Financial details, such as your annual salary and other income.
Some credit cards allow you to request your balance transfers on the application itself with:
Account details for the debt you’re hoping to transfer.
The amount to transfer to your new card.
You asked, we listened: Top 5 common questions about balance transfer credit cards
There can be a lot of fine print when it comes to balance transfers. Here are 5 common questions answered:
How much can you transfer? The minimum and maximum amount you can transfer during a balance transfer is typically determined by your card’s credit limit. Some providers will allow you to transfer up to 100% of your credit limit, while others will allow up to 70% or a specified dollar amount (such as $7,500).
What credit score do you need? Generally, you need a good credit score of 650 or higher to qualify for balance transfer credit cards, however some providers may accept customers with fair credit ratings.
What kinds of debt can you transfer? Aside from credit card debt, you can transfer nearly any type of monthly payment owed, such as personal loans and lines of credit.
What mistakes should you avoid in your application? Applying for a balance transfer credit card with your existing card provider is one of the biggest mistakes you can make. This is because providers (or their affiliates) don’t typically allow existing customers to qualify for a balance transfer promotion, after all, they’re not going to compete for their own business.
What happens if you can’t pay off your balance in time? If you can’t pay your full balance before the promotion ends, the revert APR will kick in and you’ll need to start paying that interest on future payments.
Bottom line
Balance transfers can be a good way to make a dent in your debt when high interest charges are eating away at your payments. Before you apply, make sure the switch will save you time and money by taking a look at the APR, balance transfer fee and annual fee.
Find the right balance transfer credit card for your financial situation by thoroughly comparing your options.
Frequently asked questions about balance transfer credit cards
Yes. To avoid losing your 0% intro rate, you’ll need to repay the minimum amount due on your card monthly.
Applying for a balance transfer credit 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 the balance transfer. Here, you’ll provide your creditors’ information, account details and how much of your old debt you’re looking to move to the new card. 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.
You can apply at the time of application. Some lenders also allow balance transfers within 30 days of applying for a card. Check with the lender in question.
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 stop payments to that card.
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. If you’re unsure, contact your provider.
No, most providers won’t offer you rewards points, miles or cash back on your transferred balance. You might, however, be able to earn rewards on any new purchases you make.
All of your potential fees and rates should be available in the 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 period and any annual fees you’ll pay to use the card. Make sure these fees aren’t more than your potential savings before applying. You’ll also want to watch out for penalties such as late fees.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
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