Several factors may influence whether or not you would benefit from a balance transfer card.
Is your interest rate making it difficult to pay down your balance?
When interest rates are high enough to make it nearly impossible to pay down your principal a balance transfer may be a good idea to get a better rate.
Can you qualify for a high enough credit limit?
To transfer the whole balance from one or more accounts you’ll have to qualify for a high enough credit limit.
Is the intro period going to be long enough?
Some balance transfer cards offer a low or 0% intro APR for a certain length of time when you first transfer. Promotional periods generally range from 6 to 10 months, which can give you time to pay down your newly-transferred balance.
How much will you actually save?
Balance transfers can come with fees — usually from 1% to 3% of the amount being transferred. The fee, intro APRs, long-term APRs, introductory period and your budget should be considered when you’re calculating potential savings.
Can you keep from spending more?
Keeping your old cards open will make for a lot of freed up credit. Temptation can build, so you’ll need to keep that urge to shop in line.
Is your credit score good?
Your ability to qualify for the card that’s right for your situation is also something to keep in mind. Getting another card with a high revert rate or an intro that’s not long enough may not be the best solution.
To start a balance transfer you’ll need to gather your current account information, including the amounts you want to transfer, the bank name (and its institution number), transit number and account number.
You’ll give the information you’ve gathered to the new credit card provider and the transfer will get started. During the time of the transfer, you’ll have to continue making your regular monthly payments. Transfers can take anywhere from a few business days to a few weeks depending on all parties involved.
Key considerations for completing a balance transfer
Your low or 0% intro balance transfer rate will only last for the length of the promotional period, after which it will revert to a much higher interest rate. If this rate is higher than your current one, it may not be worth transferring the balance if you can’t pay the balance off before the intro APR period ends — though this also depends on what the balance transfer fee is.
How long a balance transfer takes
This depends on the financial institutions involved. It usually takes about 2 weeks to complete. The balance transfer intro period may begin as soon as your account is approved, though some providers don’t start it until the transfer is complete.
Compare balance transfer credit cards
How much you can get out of a balance transfer card depends on your specific financial situation. Be sure to take your time while researching companies and solutions to find the one that best meets your needs.
Getting out of debt can feel like an endless cycle, but you may be able to take great strides forward with planning and patience.
Frequently asked questions
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 may also settle you with a penalty APR that can be upwards of 30%.
Your credit score can be positively impacted if you’ve held a card for a long time but haven’t used it excessively (resulting in a low credit utilization ratio). If you can keep from spending on your old card, it may be worth keeping it open.
Many credit cards that you just transferred your balance to will not have any interest free days until you’ve paid off the full balance. This means that you shouldn’t really use it unless you’re prepared to pay a higher interest rate.
If your old credit card has a reasonable purchase rate, it might be worthwhile to use that one instead and pay it off as quickly as you can. However, it’s important to focus on paying the balance you’ve just transferred first.
Sarah Barness is credit cards editor with Finder. She has more than five years in digital media, most recently at A Plus, where she was a lifestyle senior editor who managed a team of five journalists. She was also an editor at the Huffington Post, where she was a top-viewed content creator thanks to her knack for identifying emerging trends and the stories that compel millions.
About half of Canadians, or around 18 million, carry a balance on their credit card. 10.5 million of these Canadians are stressed about their pandemic debt. Find out who has the most debt stress and what they are willing to do about it.
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