When your credit card debt is out of control and you’re looking for anything that can help you out, a credit card balance transfer may be an option to consider. However, it’s important to fully understand all the ins and outs of both your current credit card and the credit card you want to transfer your balance to. While credit card balance transfers may help out if you use them properly, they also come with fees and may not be suitable if you have unmanageable debt.
Key Points
- A credit card balance transfer involves moving a balance from one or more credit cards to a new card with a lower rate, helping you save on interest and consolidate your debt.
- Balance transfers typically come with fees of anywhere from 3% to 5% of the transferred amount.
- A balance transfer should only be considered if you can repay your balance within the promotional period and if the savings outweigh the balance transfer fee.
What Is A Credit Card Balance Transfer?
A credit card balance transfer is when you transfer your existing credit card balance to another credit card, often with a lower or even 0% interest rate. The goal is to pay off your existing credit card balance during this low- or no-interest period, which can help you save a significant amount of money in interest over time, and pay down your principal balance faster and easier.
Are You Eligible For A Credit Card Balance Transfer?
To be eligible for a credit card balance transfer, you’ll typically need to meet credit score and income requirements. More specifically, you’ll likely need a good credit score and meet a minimum income amount to qualify.
In addition, most credit card providers require you to be in good standing with your current credit card account before you can qualify for a balance transfer credit card. As such, you’ll need to be up-to-date on your credit card payments.
Keep in mind that not all credit cards offer a balance transfer option. You’ll need to do some research to make sure the card you’re looking at offers this option.
How To Do A Credit Card Balance Transfer?
To balance your existing credit card balance to a new card, follow these steps:
Step 1: Research And Apply For A Balance Transfer Credit Card
Look into the balance transfer options available. In particular, pay attention to the following factors to help you choose the right card:
- Balance transfer fees: These fees are typically 1% to 5% of the transferred amount, so look for a card that comes with fees on the lower end of the spectrum.
- Interest rate: Promotional rates can be as low as 0%. Look for a card that offers the lowest promotional rate you can qualify for to maximize your savings.
- Promotional period: The longer the promotional period, the more time you’ll have to repay your outstanding credit card balance at the promotional rate.
- Annual fee: Ideally, you’ll choose a card with a $0 annual fee to keep the most money in your pocket while paying down your credit card debt.
Step 2: Transfer Your Credit Card Debt
Once approved and you’ve received the card, you can now start the balance transfer process. To do this, you’ll need to contact and provide your credit card issuer with the required information, including the credit card account numbers and amounts you want to transfer.
Step 3: Pay Off The Transferred Balance
Take advantage of the introductory rate and period to pay off the transferred balance. Make every effort to fully repay the balance before this term is up to take advantage of the low rate and avoid higher interest rates.
What Happens To An Old Credit Card After Balance Transfer?
Your old credit card is still open after you transfer your balance to a new card. It won’t be automatically closed just because you’ve moved your balance over somewhere else.
You can keep your old card open if you like, which may be a good idea given the fact that keeping old credit accounts can be good for your credit score. Plus, the credit limit on your old card can help keep your credit utilization ratio low, which also has a positive effect on your credit score.
Otherwise, you can close your old account if you don’t use it (and it has an annual fee) or don’t want the temptation to add more credit card debt. Just keep in mind that closing an old credit account could negatively affect your credit score. If you do close your old account, make sure you have it in writing and dispose of your card discreetly.
Can You Transfer A Balance Onto An Existing Card?
As mentioned, you’ll likely need a good credit score to qualify for a balance transfer credit card. But what if you don’t have the credentials to qualify?
In this case, you may consider transferring your balance to an existing credit card that you already have, perhaps one that charges a lower interest rate.
But before you do, you’ll first need to find out if the existing credit card you want to transfer a balance onto allows balance transfers. If it does, you’ll also want to make sure that the card you’re transferring to comes with a lower rate to make it worth it. You may also want to crunch the numbers to see if any applicable balance transfer fees don’t overshadow any potential savings you may be looking for by transferring a balance.
Learn more: Is Letting Someone Else Balance Transfer Onto Your Credit Card A Good Idea?
Does Balance Transfer Affect Your Credit Score?
A balance transfer can affect your credit score either positively or negatively:
Negative Impact On Credit Score
Your credit score could be negatively impacted by a balance transfer in the following ways:
- Hard Credit Check: When you apply for a new credit card, the creditor will perform a hard credit check, which can temporarily pull your score down.
- Closing An Old Account: If you close your old credit card after transferring your balance, it can reduce your overall credit availability, which can increase your credit utilization ratio. Plus, closing an old account will shorten the average age of your credit accounts, which can also have a negative effect on your credit score.
- Opening A New Account: Adding a new credit account to your profile can also shorten the average age of your accounts, which can negatively impact your credit score.
Positive Impact On Credit Score
On the other hand, your credit score could be positively affected by a balance transfer in the following ways:
- Lower Credit Utilization Ratio: When you transfer a balance and pay it down during the promotional period, you can reduce your credit utilization ratio. This can positively affect your credit score, since a lower ratio means that you’re using a smaller amount of your available credit.
- Timely Payments: Paying down or consolidating several debts can make it easier to manage your debt and fully cover each credit card payment you make. Timely payments are key to a healthy credit score, especially when you pay your balance in full.
Learn more: Can You Get A Credit Card Balance Transfer With Bad Credit?
How Much Do Balance Transfers Cost?
Balance transfer fees are often 1% to 5% of your transfer balance. You’ll want to calculate how much you could potentially pay to transfer your existing balance before you move forward.
For example, let’s say you’re thinking of transferring an existing balance of $5,000 to a new balance transfer card, with a 4% balance transfer fee. In this case, your balance transfer fee would be as follows:
$5,000 x 4% (0.04) = $200
So, in this case, you would pay $200 to transfer your balance to a new credit card, which means you’d be transferring a total of $5,200.
Also, the card you’re applying for may also have an annual fee, which needs to be factored in too.
How Much Money Can You Save From A Credit Card Balance Transfer?
To help you get an idea of how much you could potentially save from a credit card balance transfer, let’s illustrate using an example. To figure out these calculations, you’ll want to use one of the many online calculators available.
In this example, we’ll assume the following:
Old Credit Card:
- Balance: $5,000
- Interest Rate: 22.99%
Balance Transfer Credit Card:
- Introductory Rate: 0%
- Introductory Period: 9 months
- Balance Transfer Fee: 4%
After plugging in these figures in an online balance transfer calculator, you’ll find that you’d save $662 over the 9-month introductory rate period, taking into account the balance transfer fee of $200.
This is assuming that you’ll pay off the entire balance during the promotional period. If you still have a balance after this term ends, you’ll be charged the new card’s regular rate, which can eat into your savings.
Effect Of New Purchases On Repayments
It’s important to note that making new purchases with your balance transfer credit card can greatly affect your repayments. This is because new purchases may accrue interest right away if they’re not covered by the 0% introductory APR.
Since minimum payments typically go toward the lower-interest transferred balance first, new purchases may accrue interest at a higher rate, which increases your total debt amount and extends your repayment period. Plus, if you spend too much or miss payments, you could lose the promotional APR completely.
It’s best to use a separate credit card to make new purchases and use your balance transfer card solely to pay off the transferred balance.
Benefits Of A Credit Card Balance Transfer
Credit card balance transfers can be helpful for the right person and scenario, but potentially detrimental in the wrong situations. Here are some advantages of a credit card balance transfer:
Consolidate Debt
Through a credit card balance transfer, you can combine or consolidate, more than one credit card balance onto the same card. Putting all your credit card debt into one balance through a transfer helps you tackle your debt faster by allowing you to make single, monthly payments toward the same balance.
Lower Interest Rates
Balance transfer credit cards often have low introductory interest rates, usually for the first year. This allows you to focus your payments on principal rather than interest.
More Streamlined Payments
Consolidating several high credit card balances into one account can make it easier for you to manage your monthly payments and track your repayment progress.
Possible Credit Score Boost
Paying down your credit card debt can reduce your credit utilization ratio, which can help you improve your credit score.
New Credit Card Perks
Not all credit cards are equal. Some have high interest rates and minimal rewards, while others might offer more manageable interest rates, and certain perks like cash back on purchases, travel rewards, decent points plans for specific purchase categories, low annual fees, and high credit limits. Through a credit card balance transfer, you may have the opportunity to switch to a new credit card that offers more rewards that are more suitable for your life situation.
Best Balance Transfer Credit Cards In Canada
| Card | Fees | Intro APR | Promotion Length |
| MBNA True Line® Mastercard® | – Annual fee: $0 – Balance Transfer Fee: 3% | 0% | 12 months |
| BMO® Preferred Rate MasterCard® | – Annual fee: $29 (waived year 1) – Balance Transfer Fee: 2% | 0.99% | 9 months |
| Tangerine Money-Back Credit Card | – Annual fee: $0 – Balance Transfer Fee: 1% | 1.95% | 6 months |
| Scotia Momentum® No Fee Visa | – Annual fee: $0 – Balance Transfer Fee: 2% | 0% | 6 months |
| CIBC Select Visa | – Annual fee: $29 (waived year 1) – Balance Transfer Fee: 1% | 0% | 10 months |
Learn more: Best Balance Transfer Credit Card In Canada 2025
Things To Keep In Mind Before Accepting A Credit Card Balance Transfer
Although credit card balance transfers can help you save in many ways, it’s important to understand the potential drawbacks.
Balance Transfer Fee
Balance transfer fees are charged any time you move one credit card balance to another. Often 1-5% of your transfer balance, this fee should be considered before deciding to transfer any balances.
Low Interest Rate Is Only For A Limited Time
A low introductory interest rate can be an advantage of a credit card balance transfer, but it doesn’t last forever. Appealing 0% APR rates are only offered for a short period of time, anywhere from 6 to 12 months. You’ll want to plan ahead and assess how long it will take you to pay off your transferred debt. This will help you budget for higher interest fees that may show up after the introductory period.
Good Credit Is Often Required
To be eligible for a credit card balance transfer, you’ll often need a decent credit score. If your credit score is low, you may still be considered, albeit with a higher interest rate, which may cause you to reconsider the credit card balance transfer altogether.
Potential For More Debt
Credit card balance transfer agreements might entice you with low interest rates and minimal fees in the beginning. However, be conscious of the temptation to make more purchases with the new card’s appealing interest rates. If you look at a transfer as a way to purchase more items, you’ll just add more debt.
Steps You Should Take to Come Out Ahead
To ensure you make the most out of a credit card balance transfer, consider the following factors:
Make Sure You Qualify
Check your credit score to ensure you qualify for a balance transfer credit card. With a low credit score, you risk higher interest rates even if you do qualify.
Understand The Fees
As mentioned, balance transfer credit cards charge transfer fees. Make sure you crunch the numbers to see if the cost of transferring your balances is financially worth it compared to your potential savings.
Assess Your Debt
Determine how much credit card debt you want to transfer to a new low-rate card and calculate the interest you’re currently paying. This will help you get a better idea of the potential savings by transferring your balance.
Don’t Apply For Too Many Cards
Only apply for one balance transfer card at a time to avoid several hard credit checks on your credit report, which can pull your credit score down.
Consider How Long You’ll Need To Repay Your Balances
Make sure you’re able to repay your balances in full within the introductory period. Otherwise, the regular purchase rate will kick in, and you’ll be left with an unpaid balance that will be charged a much higher rate than the promotional rate.
Keep Up With Your Payments
Missing a payment can come with several consequences. For starters, it could void your promotional rate and result in late fees. Missing too many payments can also hurt your credit score if the creditor reports payments to the credit bureaus. If you have trouble managing your payments, consider setting up automatic payments so you never miss a due date.
When Should You Consider A Balance Transfer?
A balance transfer may be great for some consumers, but not for others. Consider the following before deciding whether to apply for a balance transfer:
| When To Consider A Balance Transfer | When To Avoid A Balance Transfer |
| – You have a lot of credit card debt, which can make the balance transfer fee potentially worth the cost. – You can qualify for a 0% APR introductory offer. – You can still make regular bill payments. | – You have little debt, so the balance transfer fee could outweigh the interest savings. – You have bad credit, in which case you may not qualify for a 0% rate on a balance transfer credit card. – You can’t stick to a repayment plan, which could cause your financial situation to worsen. |
Alternatives To Balance Transfers
If a balance transfer isn’t suitable for you, other alternatives may be available:
- Debt Consolidation Loans. These personal loans can help you consolidate your credit card debt into a single monthly payment, typically at a lower rate than what you’re currently paying on your credit card.
- Negotiating With Creditors. Speak with your credit card provider to see if they’re willing to offer you more manageable repayment terms or a lower interest rate.
- Use A Repayment Plan. Debt repayment strategies, such as the snowball or avalanche methods, can help you pay down your debt in a strategic way to help you get out of debt faster while saving you in interest.
- Credit Counselling. A credit counsellor can help you come up with a realistic budget or debt management plan customized to your situation.
Final Thoughts
Overall, credit card balance transfers can be a great way to help you pay off your debt faster, at a minimal cost. Remember to shop around for the most suitable contract for your lifestyle, and consider other loan alternatives if necessary.
