Balance transfer credit cards allow you to move an existing debt on a credit card to a new card. Since some credit cards have a low interest rate, this can work to your advantage. For example, you could go from the average interest rate of 19.99% to as low as 0% during a promotion.
When used responsibly, a credit card balance transfer is an easy way to help you reduce your debt. However, this is a one-time deal since balance transfers can usually only be done at the time of application or within 90 days of account opening.
If the card you’re applying for has a balance transfer promotion, it’ll only be good for a limited time before rates go back up. That said, the interest rate charged will usually still be lower than traditional cards, so making the switch can be worth it.
How to choose a balance transfer card
All balance transfer credit cards can help you reduce your debt. That said, they also have some minor differences that are worth looking at. Consider the following when choosing a balance transfer credit card.
- Promotional offer. Is there a promotional offer? How long does it last, and what’s the interest rate?
- Standard interest rate. How much interest will you pay when the promotional period ends?
- Balance transfer fee. Is there a balance transfer fee? If so, how much is it?
- Balance transfer limit. Some cards allow you to balance transfer up to the full credit limit you’re given. In contrast, others only allow you to transfer up to 50% of your assigned limit.
- Balance transfer timeline. Some cards only allow you to balance transfer at the time of application, while others give you 90 days from account opening.
- Annual fee. It may be worth paying a yearly fee to get access to lower interest rates.
Although there may be fees associated with a balance transfer, the amount you save on interest could be worth it. Some providers will even let you transfer someone else’s debt to your card, but then you’d be responsible for repayments. Don’t think too much about any additional benefits, as your goal should be reducing debt.
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How to get a balance transfer credit card
Applying for a balance transfer credit card is easy since you can do it online or at your financial institution. Since many providers require you to do the balance transfer at the time of application, you’ll want to have your other account numbers and balances handy.
Balance transfer credit cards are traditional cards, so you’ll likely need to meet the following conditions to be approved:
- Must be a Canadian resident
- Must be at least the age of majority in the province or territory you reside
- Meet the minimum income requirement (if any)
- Not declared bankruptcy in the last seven years
- Your credit score is in good standing
Once approved, you’ll already have a balance owing on your card if you performed a balance transfer. Be sure not to miss any payments, or your interest rate may immediately default to the standard purchase rate.
Getting a balance transfer credit card can be an excellent option to reduce debt since the interest rates offered can be relatively low. Use this to your advantage and pay down your debt so you can take control of your finances.