Carrying debt on a high-interest credit card? One way to tackle this problem is to do a balance transfer – whereby you move debt from one high-interest credit card to a new one with a much lower (or no) interest rate.
This smooth move could save you hundreds of dollars in interest, allowing you to pay down your debt faster. A balance transfer credit card is a card with very low or no monthly interest on balance transfers.
Basically, you’re using one card to pay off another, while also taking advantage of a rock bottom interest rate that’ll make your payments more manageable.
Here are our top picks for the best balance transfer credit cards in Canada:
Best Canadian Balance Transfer Credit Cards in Canada 2020
Credit Card Annual fee Balance Transfer Intro Rate Read More Tangerine Money-Back Credit Card $0 1.95% for 6 months Read More BMO Preferred Rate Mastercard®* $20 (Waived for the first year)* 3.99% interest on balance transfers for the first 9 months (1% transfer fee applies) Read More *Conditions apply
How to Choose a Balance Transfer Credit Card
When choosing a balance transfer credit card, here are five things to be on the lookout for:
- Introductory interest rate on transferred balances: The lower the interest rate, the better. Paying 0% is the best-case scenario!
- Length of promotional grace period: The amount of time the promotional rate is in effect varies card to card. The longer, the better – especially if it’s a lengthy 0% timeline.
- Balance transfer fee: Typically expressed as a percentage of the balance you’re moving, this fee is tacked onto your total.
- Annual fee: Some balance transfer cards have an annual fee, so work that into your calculations. A card with no annual fee is best for transfers.
- Regular rate: What is the interest rate after the grace period? Although your plan should be to pay down your debt before the low-interest promotion expires, you don’t want to be caught out paying a higher-than-average rate should you need to take more time.
- Rewards: Sweetening the pot, some balance transfer cards also allow you to collect rewards.
One thing to note: the low-interest rate for balance transfers is typically offered on an introductory basis for a finite period.
After the promo expires, the balance is charged at a much higher rate. So your goal should be to pay down your balance before the promotion period ends.
Best Balance Transfer Credit Cards in Canada
Tangerine Money-Back Credit Card
The Tangerine Money-Back Credit Card is offering a sweet balance transfer deal to new customers: make a transfer within 30 days of opening your account and pay only 1.95% for 6 months, after which time you will pay the standard interest rate of 19.95%. This is an attractive offer, especially combined with no annual fee and Tangerine’s cash-back benefits of 2% on eligible money-back categories.
- Annual Fee: $0
- Minimum Income Eligibility: $12,000
- Credit Score Required: Good to Excellent
- Welcome Offer: 1.95% introductory interest rate for 6 months when you transfer a balance within 30 days of opening your account.
- Balance Transfer Fee: 3% of a minimum of $5.00
- Other Perks: Automatic, monthly reimbursement to your credit card balance or savings account
- Other Card Info: Purchase APR: 19.95% | Cash Advance APR: 19.95%
BMO Preferred Rate Mastercard®*
The BMO Preferred Rate Mastercard®* offers a 3.99% introductory interest rate on balance transfers for 9 months (with a 1% transfer fee). But this card also gets our vote because of its everyday low interest rate of 12.99% on purchases and cash advances. So after the promo period ends, any remaining balance transfer amount would be charged at this rate, which is one of the most competitive on the market.
For perks, this card includes extended warranty coverage (which extends the manufacturer’s warranty period for up to one year) and purchase protection (which insures your card purchases against theft or damage for 90 days). Another bonus: the $20 annual fee is waived for the first year for new cardholders who take advantage of the balance transfer introductory offer.
- Annual Fee: $20 (Waived for first year)*
- Minimum Income Eligibility: $15,000 per year
- Credit Score Required: Fair to Good
- Welcome Offer: 3.99% interest on balance transfers for the first 9 months (1% transfer fee applies)
- Additional Perks: Extended warranty and purchase protection
- Other Card Details: Purchase APR: 12.99% | Cash Advance APR: 12.99%
Why Get a Balance Transfer Credit Card?
Transferring a balance can be an excellent strategy for consolidating debt and getting you back in the black.
When moving outstanding debt from a high-interest credit card onto a balance transfer credit card, you can either stop or greatly reduce the accumulation of interest while buying time to pay down your principal.
For example, imagine you have $2,500 in debt sitting on a credit card with the typical interest rate of 19.99%.
The interest on that debt totals around $500 over a year—that’s no small change! Instead of chipping away at the debt while interest accumulates, you could send that debt over to a balance transfer credit card at a lower interest rate and pay down the principal with little or no interest accumulating. In the long-run, this savvy strategy could save you some serious coin.
In general, balance transfer cards are a very good idea for small or medium amounts of debt. Since you can transfer debt from multiple cards, they work like a charm if you’re trying to consolidate what you owe.
Just make sure to read the fine print, as interest rates and grace periods vary for each credit card.
Balance Transfer Card Best Practices
Get the most from your balance transfer credit card by following these savvy strategies:
- Don’t make new purchases on your balance transfer card: Your balance transfer is charged at a low or 0% rate of interest, but there is a different interest rate for new purchases. If you make purchases on the same card, your payments will be equally split between your balance transfer and the purchase amount. The idea of using a balance transfer card is to pay down debt fast, and this simple mistake will stretch out your repayment time—and trigger interest on the purchase amount. It’s a good idea to have a separate card for new purchases, so consider leaving one of your existing accounts open—or look into getting a low-interest credit card.
- Don’t exceed your credit limit: Some companies allow overspending – and if that happens, there’s a chance of losing your introductory low-interest rate.
- Pay your minimum monthly payments: If you miss a payment deadline, you could lose your low introductory interest rate.
- Keep track of the time: Like all good things, the promotional period must come to an end. When it does, you’ll be charged at a much higher interest rate. Aim to pay off your debt in full, but failing that, give yourself time to transfer your remaining debt to another balance transfer card.
Still got questions? Read more about how to transfer a credit card balance like a boss.
The Final Word
If you’re one of the many Canadians holding a modest amount of debt, you should definitely consider getting a balance transfer credit card to lighten the load.
With typical credit card interest rates running at around 20%, a small money misstep can turn into an onerous obligation—and fast. Luckily, the smart and strategic use of balance transfer credit cards can help minimize the financial blow.
Just remember to shop around for the right one: look carefully at the introductory interest rate, regular interest rate, annual fee, and balance transfer fee to see which credit card best matches your needs.
With a little strategy and determination, you can eliminate your debt in no time at all.
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This post was not sponsored. The views and opinions expressed in this review are purely my own.