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Overdrawn credit card? Consider a balance transfer

Manage an overdrawn credit card by consolidating your debt with a balance transfer.

Charges on your credit card can pile up sometimes, and reaching your credit limit can become a common occurrence if you don’t carefully watch your account balance. It’s not a good situation to be in, and can lead to debt and negative marks on your credit file. If you’ve overdrawn on your credit card and are struggling to repay it, a balance transfer with a 0% interest rate could help you consolidate your debt and ultimately pay it down faster and cheaper. Read this guide to find out what happens when you overdraw on your credit card and how a balance transfer could help you get your finances under control.

What happens when I overdraw on my credit card?

Going over your credit limit can have unpleasant consequences. While the consequences can vary between cards and providers, some of the common outcomes include:

  • Overlimit fees. Typically, your card provider will charge you an overlimit fee when you go over your credit card limit, which is often a flat fee for the statement period. Credit card providers must disclose this fee in your contract and you have the right to opt out of the option to exceed your credit limit by notifying your provider. Opting out, however, will result in your transactions being declined once you reach your limit.
  • Declined transactions. If you choose to not have the ability to exceed your credit limit, your card will be declined once its credit limit is exceeded. While this could be embarrassing if you’re paying in-store with your card, any direct debits or automatic payments that may come through during this time will also be declined, which may result in late payment fees by your service provider or cancellation of services, such as if your electricity payment is denied.
  • Interest charges. There is no direct interest penalty for exceeding your credit limit, but some cards deem you ineligible for interest-free days on purchases if you don’t repay your balance in full for two consecutive periods. This means your interest fees can be retroactively charged for the period and can build up very quickly in the next period if you don’t repay your full balance for the current statement cycle.
  • Ongoing debt. Regularly maxing out your credit card leads to ongoing debt if you’re not able to repay the full amount each month. Carrying an outstanding balance on your credit card can lead to heavy interest payments and a seemingly endless cycle of debt.

Learn more about spending over your credit limit

When could a balance transfer help?

If you’ve overdrawn on your credit card account because of ongoing debt issues, it may be worthwhile to consider moving your debt to a balance transfer credit card with a low or 0% introductory interest rate. This will help you save on interest charges so that you can pay off your original debt sooner. If this sounds like a good idea, consider these possible balance transfer offers:

  • 0% balance transfer offers. There are a few 0% balance transfer offers on the market. With these offers, you’ll typically get up to six months to pay off the balance before your debt begins to accrue interest at the revert rate.
  • Low rate balance transfer offers. If your debt is going to take longer to chip away at, consider a low rate balance transfer offer. With rates starting at 1.99%, it’s possible to find an offer extending up to ten months, or sometimes longer.

Compare balance transfer credit cards

Name Product Balance Transfer Rate Balance Transfer Fee Purchase Interest Rate Annual Fee Min. Credit Score Description
Scotiabank Value Visa Card
0.99% for the first 6 months (then 12.99%)
N/A
12.99%
$29
Min. recommended credit score: 660
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by February 28, 2022.
BMO CashBack Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,000). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Tangerine World Mastercard
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until November 30, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Preferred Rate Mastercard
3.99% for the first 9 months (then 12.99%)
1%
12.99%
$20
Min. recommended credit score: 660
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Tangerine Money-Back Credit Card
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until November 30, 2021. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Rewards Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 725
Get a bonus of 10,000 BMO Rewards points when you spend $1,000 in the first 3 months. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO AIR MILES Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 800 AIR MILES Bonus Miles (enough for $80 towards purchases with AIR MILES Cash). Get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
Scotia Momentum No-Fee Visa Card
1.99% for the first 6 months (then 22.99%)
N/A
19.99%
$0
Min. recommended credit score: 660
Earn 5% cash back on all purchases for the first 3 months (up to $2,000 in total purchases). Plus, get a 1.99% introductory interest rate on balance transfers for the first 6 months with no balance transfer fee. Apply by January 1, 2022.
Scotiabank Gold American Express Card
0% for the first 6 months (then 22.99%)
1%
19.99%
$0 annual fee for the first year ($120 thereafter)
Min. recommended credit score: 700
Earn up to 40,000 bonus Scene+ points in your first year (that's up to $400 towards travel) and no annual fee in the first year, including supplementary cards. Plus, get a 0.00% introductory interest rate on balance transfers for the first 6 months (A 1% balance transfer fee applies). Apply by January 1, 2022.
Scotia Momentum Visa Card
2.99% for the first 6 months (then 22.99%)
N/A
19.99%
$39
Min. recommended credit score: 660
Get a 2.99% introductory rate on balance transfers and a 0% balance transfer fee for the first 6 months. Apply by February 28, 2022.
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Other factors to consider before doing a balance transfer

If you’ve decided that a balance transfer is the right option for you, be sure to consider the following factors before you apply:

  • Settling the overlimit amount. Some credit providers consider a card to be in default once you’ve exceeded your credit limit, and may restrict its functions until you’ve paid the amount to return it to within its limit. On the other side of things, this will also likely cause your balance transfer application to be denied because the account you are trying to transfer a balance from is not in good order. While some card providers do not explicitly state this, it is advisable that you pay your account down to within its credit limit before applying for a balance transfer card.
  • Your new credit limit. This is important because you don’t want to face the same problem of maxing out your new credit card. It would be preferable if your new credit limit is higher than the current one so that it can accommodate your full balance transfer request. Some balance transfer credit cards only allow you to transfer amounts up to a fixed percentage of your new card limit, such as up to 70%, so it’s important that you ensure that the new credit limit is larger than your existing debt.
  • Balance transfer fees. This cost, which is typically 1-3% of your balance transfer amount, should be factored into your calculations. The balance transfer would not be worthwhile if you have to pay a high transfer fee, however, there are plenty of cards that do not charge a balance transfer fee at all.
  • Credit rating. Most credit providers will require that your credit score be very good or excellent before approving your balance transfer application. If your credit rating is not in a good state at this point, it may be advisable that you defer any credit card applications because they could further hurt your credit score if you’re rejected by the provider.

Alternative ways to deal with overdrawn accounts

There are other options available aside from doing a balance transfer, including:

  • Making additional repayments. This can be an effective way of staying within your credit limit. By making repayments twice a month instead of monthly – or more often if possible – you can successfully avoid maxing out your card.
  • Requesting a credit limit increase. You may be eligible for a credit limit increase if your credit score is good and you’ve had a healthy history of making regular repayments with your card provider. You can usually request an increase in your credit limit by logging into your online banking or by contacting your provider over the phone.
  • Contacting your provider. It is often a good move to call your credit provider for a chat. If you explain your circumstances, they are usually willing to discuss your options and offer possible solutions in order to retain your business.

Bottom line

Overdrawing on an account is never ideal, but there are several ways to prevent this. If you’re struggling with debt, a balance transfer may help provide the breathing room you need for a specified period of time. However, a long-term solution may involve seeking help for debt management.

Comprehensive guide and comparison for balance transfer credit cards

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