Credit card debt can sneak up on you before you know it. Between everyday expenses, emergencies, and impulse purchases, your credit card balances can quickly get out of hand. If you find yourself struggling to pay down high-interest credit card debt, a balance transfer credit card may provide some much-needed relief.
What is a Balance Transfer Credit Card?
A balance transfer credit card allows you to consolidate debt from other high-interest credit cards onto a new card with a low introductory interest rate. This intro rate is usually 0% for 6-21 months.
Balance transfers let you save substantially on interest, putting more of your payment toward the principal balance each month. This can help you pay off your debt much faster.
How Do Balance Transfers Credit Card Work?
Getting a balance transfer credit card is easy. Simply apply for a card offering a 0% intro rate on transfers. Once approved, you can transfer balances from other credit cards onto your new card.
Here are the steps for completing a balance transfer:
- Get approved for a balance transfer card. Look for a 0% intro APR for 12-21 months.
- Contact the bank to initiate balance transfers after approval. You can transfer balances up to your credit limit.
- Make payments on your new balance transfer card and avoid new purchases during the intro period. This dedicates all your payment to paying off transferred balances.
- Pay off the entire balance before the intro rate expires. Otherwise, remaining balances will start accumulating interest at the regular APR.
Benefits of Balance Transfers
There are many potential benefits of using a balance transfer card strategically:
- Save on interest costs – 0% intro APRs eliminate interest for a set period of time. This can save you hundreds or even thousands in interest.
- Pay off debt faster – Lower interest costs mean more of your payment goes to the principal balance each month. This speeds up repayment.
- Consolidate multiple balances – Transferring multiple credit card balances onto one card simplifies debt management.
- Improve credit through on-time payments – Making consistent on-time payments can boost your credit.
- Get out of debt – Balance transfers kickstart the debt payoff process.
Risks and Drawbacks
While balance transfers offer advantages, be aware of the potential downsides:
- Deferred interest – If balances remain after the 0% period, deferred interest charges will be added.
- Balance transfer fees – Most cards charge a 3-5% fee on the amounts transferred.
- Opening another account – Too many new accounts can negatively impact your credit score.
- Continuing to overspend – Balance transfers provide temporary relief only. You need the discipline to not take on new debt.
Tips for Getting the Most from Balance Transfers
Follow these tips to maximize the benefits of a balance transfer credit card and avoid pitfalls:
- Shop around – Compare balance transfer offers from multiple cards to get the best terms. Aim for 0% intro APRs lasting 12 months or longer.
- Mind the fees – Factor in balance transfer fees when deciding which offer to accept.
- Transfer judiciously – Be cautious about transferring too much. Leave room for important purchases during the intro period.
- Make payments on time – Pay at least the minimum before the due date to avoid fees and penalty APRs.
- Avoid new purchases – Try not to charge purchases to the card so all payments apply to transferred balances.
- Have a payoff plan – Make sure you can fully pay transferred balances before regular APRs kick in.
- Read the fine print – Understand the card’s terms to avoid deferred interest charges.
Best Balance Transfer Credit Cards in Canada
If you’ve determined a balance transfer card is right for you, review these top-rated options for Canadians looking to consolidate debt:
|Balance Transfer Fee
|MBNA True Line® Mastercard®
|1% of transferred balance
|BMO Preferred Rebate Mastercard
|3% of transferred balance up to $75
|Scotiabank Value® Visa Card
|3% of transferred balance
|TD Emerald Flex Rate Visa
|3% of transferred balance
|CIBC Dividend® Visa Infinite* Card
|3.5% of transferred balance
With a balance transfer credit card, you can take control of your credit card debt. Compare your options to find the card offering the best terms and intro rates for your transfer needs. Apply carefully, transfer with a plan, and commit to making responsible payments to clear your debt once and for all.
The key is using balance transfers strategically – take advantage of low intro rates to pay off debt faster, but avoid continued overspending.
Frequently Asked Questions
How much credit do I need to qualify for a balance transfer card?
Most balance transfer cards require good to excellent credit, usually 670+ FICO or higher. Lenders want to see you can responsibly manage debt. Those new to credit or rebuilding credit can qualify for alternative cards with no intro APR but lower regular rates.
Can I transfer balances between cards from the same bank?
Yes, you can transfer balances from one card to another within the same bank, like shifting your balances from one CIBC card to a new CIBC balance transfer card.
Is there a time limit to complete the balance transfer?
You typically have 30-90 days after account opening to complete balance transfers. Check your cardholder agreement for the applicable time limit. Try to submit transfer requests ASAP.
Should I close old credit card accounts after transferring the balances?
It depends. Closing old accounts can ding your credit score if it reduces your total available credit. But keeping old cards open can tempt you to overspend. Consider closing only recently opened accounts.
What are some alternatives to balance transfers?
Options besides balance transfer cards include debt management plans, credit counseling, debt consolidation loans, 0% APR purchases cards, low interest personal loans, and debt negotiation. Compare all strategies.
How Do I Choose the Best Balance Transfer Card for Me?
With so many balance transfer cards to choose from, it can be tricky to identify the best option for your unique situation. Here are some key factors to consider when comparing balance transfer card offers:
- Length of 0% Intro APR – Cards with intro periods from 12-21 months give you more time to pay off balances interest-free. Look for offers on the longer end if you need more time.
- Balance Transfer Fee – Most cards charge a one-time fee from 3-5% on the amounts transferred. Look for lower fees to maximize savings.
- Ongoing APR – Check the regular non-promo APR. You want to pay off all balances before this higher rate applies.
- Available Credit – Make sure your credit limit can accommodate the balances you plan to transfer over.
- Perks – Some cards include rewards, cash back, or additional features. These are lower priority than rates and fees.
- Foreign Transaction Fees – If you travel abroad, consider no foreign transaction fee cards like the Home Trust Preferred Visa or Rogers World Elite Mastercard.
Prioritize the costs, rates, and timeframes that benefit you most. Weigh the pros and cons of different offers before applying.
What Credit Score Do I Need for a Balance Transfer?
For the top balance transfer cards, you will generally need good to excellent credit, which is a FICO score of 670 or higher. This indicates to lenders you are a responsible borrower who pays bills on time and manages credit wisely.
Those new to credit or rebuilding may need to start with a secured card and graduate to more traditional cards over time. Alternatives like the Capital One Guaranteed Secured Mastercard help establish credit.
Regularly check your credit reports and maintain healthy credit habits. Aim to improve your score over time to qualify for the best balance transfer offers.
Should I Make Purchases on My Balance Transfer Card?
It’s best to avoid making purchases with your new balance transfer credit card, at least during the introductory 0% APR period. Purchases will start accumulating interest at the regular rate right away.
Keep your old credit card open for new purchases if needed. This way, you can dedicate the full balance transfer card payment toward existing debt until it’s paid off.
Once you’ve paid the transferred balances in full before the expiry, you can consider using the card for purchases responsibly. But the card’s main purpose is as a temporary debt consolidation tool.
How Can I Avoid Paying Deferred Interest?
Some balance transfer offers come with deferred interest – where interest accrues from day one but is only charged if balances remain after the 0% period. Avoid deferred interest traps with these tips:
- Review terms carefully to understand interest policies.
- Make a plan to pay off the entire transferred amount within the intro period.
- Try not to use the card for purchases to avoid adding to balances.
- Pay at least the monthly minimum payment by the due date.
- Set up autopay from your bank account to avoid lapses.
- Contact the issuer if you anticipate missing payments to discuss options.
As long as you pay off the balance transfer amount in full within the 0% intro timeframe, you can avoid deferred interest fees.
In summary, balance transfer cards offer a powerful tool for saving substantially on interest while eliminating credit card debt. Yet they require diligence, discipline, and commitment to maximize the benefits without getting caught in continued cycles of overspending. Approach balance transfers strategically, not as an easy fix. But when used correctly, they can put you back on solid financial footing.