Many Canadians pay huge interest on credit card balances for big purchases made on their credit card and wonder why their debt keeps adding up instead of going down. If you plan to become debt-free, but still paying a lot of interest on your credit card, here is a way out for you; the Balance Transfer Credit Card.
Balance Transfer Credit Card enables you to transfer or move big balances or debts on your current credit card to a new low interest credit card. As a result, you can consolidate all your debts into a single credit card while paying low interest rates.
Balance transfer offers from credit card issuers are mostly for a promotional period, usually between three (3) months and one year (12 months). At the end of the promotional balance transfer offer, the standard Balance Transfer rate will be applied on the credit card.
What is a Balance Transfer Credit Card?
A Balance Transfer Credit Card is a credit card that comes with a very low interest rate offer to enable cardholders with credit card debts to transfer their high interest debts or balances to a new low interest rate or interest-free credit card.
Balance Transfer Credit Cards are fantastic methods of consolidating credit card debts, lines of credit, and other personal loans for a promotional period of zero interest rate or low interest rate offers.
How Balance Transfer Credit Card Works
A balance transfer is a smart and straightforward method of managing your debts and finances, and paying low interest charges and your credit card. This is done by moving (transferring) your high interest debts or balances from the old credit card to a new low interest or interest-free credit card.
A Balance Transfer Credit Card can save you hundreds of Canadian dollars, which you would have used to pay off or down your credit card interests. As a result, the Balance Transfer Credit Card lets you move your huge debts on a high interest credit card to a new offer of extremely low interest rate credit card.
Hence, for the period of the promotional offer, usually from 3 months to 12 months, you will only pay the low interest on the credit card. At the end of the promotional period, the regular or standard interest rate (usually about 20%) will apply to the card.
The high interest on your credit card compounds the credit card debts, and this is something you need to avoid. Thus, when the chance presents itself, it is vital to use the opportunity of the promotional period of the low interest or zero interest in some cases, to consolidate and clear your debts.
A Balance Transfer Credit Card can help you as a cardholder with a significant high debt to pay off or down your credit card debts faster.
How To Set Up And Transfer Balances
To set up your Balance Transfer, go to your issuer or bank’s online portal or app, and follow the application procedure. Ensure that you understand and agree to the terms and conditions of using the card, as well as what offer is given to you by the card issuer.
To clear any doubts, you may need to call a customer service representative of the bank with the phone number usually found on the back of credit cards.
When that is done, complete the card application and balance transfer request, by providing the account information of the card on which you want to move the balance, the creditors you want to pay, and the amount you want to transfer. Depending on the card issuer, a balance transfer transaction fee usually applies, and the transfer limit varies by card issuers.
The balance transfer process and approval may take up to or above 10 business days, but once your application goes through, the financial institution will contact your creditors. Therefore to enjoy the promotional low interest benefits, it is important to pay all the required minimum debt payments as of when due and avoid late fees, which may return the interest rate to the regular rates.
List of Balance Transfer Credit Cards in Canada
Here is a list of some of the best Balance Transfer Credit Cards in Canada, with amazing promotional offers of zero interest and low interest rates.
- MBNA True Line MasterCard
- MBNA True Line Gold MasterCard
- Scotiabank Value Visa Card
- American Express Essential Credit Card
- Tangerine Money-Back Credit Card
- Best Western MasterCard
- BMO CashBack MasterCard
- BMO Airmiles MasterCard
- President’s Choice Financial MasterCard
- President’s Choice Financial World MasterCard
- President’s Choice Financial World Elite MasterCard
- Harley-Davidson MasterCard
- BMO Preferred Rate MasterCard
- Tangerine World MasterCard
- American Express Platinum Card
- National Bank Allure MasterCard
- ECHO Cash Back MasterCard
- National Bank World Elite MasterCard
- National Bank Syncro MasterCard
- Scotia Momentum Visa Card
- No-Fee Scotiabank Value Visa Card
Benefits of Balance Transfer Credit Cards
Balance Transfer Credit Cards help you to consolidate your debts to make one monthly payment rather than making multiple payments to numerous credit cards or creditors.
Quick Debt Payment/Reduction
The low interest or zero interest rate promotional offers of Balance Transfer Credit Cards can help you to pay down the higher interest rate card debts. Hence, instead of paying interest charges, you can use the larger part of your payments to pay off the principal debt.
Save On Low Interest Monthly Payments
When you transfer your high interest debts to a balance transfer Credit Card with low promotional interest rates, it can lead to the payment of extremely low interest monthly payments.
Some Balance Transfer Credit Cards offer you the chance to earn cash back and rewards points towards groceries, gas, and travel purchases.
Factors To Consider In Choosing A Balance Transfer Credit Card
Before picking your choice of a Balance Transfer Credit Card, here are some key factors that you need to consider.
Promotional Balance Transfer Interest Rate
You need to consider the promotional interest rate offered by the card issuer. If available, zero interest (0%) rate credit cards are the most suitable, and if not, the lower the interest, the better.
Balance Transfer Fee
Most Balance Transfer Credit Card issuers charge between 1% to 3% balance transfer transaction fees. This fee will be added to your total transferred balance. For instance, a 2% balance transfer fee on 5000 CAD will amount to 5,100 CAD transferred balance.
Length Of Promo Offer
You need to also consider the length of the promotional low interest period if it will be enough to pay off or don your balance. Each credit card has its own promotional period, and the longer, the better.
Regular Balance Transfer Rate
Note that after the promotional period, the regular or standard balance transfer interest rate will be applied on the card. Therefore, if you are unable to pay down all your debts before the low interest promo expires, you need to ensure that the standard interest rate is not higher than the average balance transfer interest rate.
It is important to ascertain if the Balance Transfer Credit Card comes with an annual fee and what effect it will have on your debt payments.
Rewards and Additional Perks
You should also consider if the benefits that come with the card suits your lifestyle or needs. Some Balance Transfer Credit Cards offer rewards points that can be redeemed for various items and services, as allowed by the card issuer. Other benefits and additional perks to consider include purchase protection, travel insurance, cash back, and more.
Some Balance Transfer Credit Cards have specific eligibility requirements that potential cardholders must fulfill, such as minimum personal annual income, credit score, bankruptcy status, and more. You should check with the bank to ascertain your eligibility qualification for the card.
How To Maximize Your Balance Transfer Credit Card
When taking advantage of a Balance Transfer promotional offer and saving money on interests, here are some tips to maximize the use of your Balance Transfer Credit Card.
Fast Payment of Balance
It is important to note that the essence of a balance transfer promo is to pay off or down the balanced before the promotional offer expires. Hence, use the promo period to pay down your card balance before the regular interest rate applies.
No Purchases on The Card
Any purchases made with your credit card will be subjected to the standard interest rate on purchases, and thus, adding to your debts. Do not use your Balance Transfer Credit Card to make purchases, at least, until the expiration of the promotional low interest period.
Avoid Late Payments
You should ensure prompt and timely payment of your minimum balance every month. You will be penalized for late payments, as this will lead to termination of the low interest rate promotional offer. Consequently, you will be charged a higher interest rate as a penalty for default. This could however, have a negative effect on your credit score.
Low-interest Balance Transfer Credit Cards offer promotional interest rates for a period of time. You should take advantage of this offer before the promo ends, to pay off or down your debts and balances. After the promotional offer expires, the regular interest rate of a much higher rate will apply.
The aim is to pay off your balance before the promo period ends. Meanwhile, you should also consider the factors outlined in this article to help you make a careful and informed choice.