Balance Transfer Credit Card Canada: Everything You Need to Know

Canada is known for its thriving economy, but managing personal finances can be challenging. Many Canadians struggle with debt, and high-interest rates on credit cards only make the problem worse. If you’re looking for a way to consolidate your debt and save money on interest fees, a balance transfer credit card may be the solution you need. In this guide, we’ll explain what balance transfer credit cards are and how they work in Canada.

Balance Transfer Credit Card Canada: Everything You Need to Know

What is a Balance Transfer Credit Card?

A balance transfer credit card allows you to transfer the outstanding balances from your existing credit cards or loans onto one new credit card. The goal of a balance transfer is to help you consolidate multiple debts into one account and lower your overall interest rate. The amount transferred will be subject to the terms and conditions of the new credit card issuer.

Balance transfer credit cards generally offer low introductory interest rates on transferred balances. These promotional rates typically last six to twelve months, giving you time to pay down your debt without accruing excessive interest charges. After the promotional period ends, however, the interest rate will increase – sometimes dramatically – so it’s important to plan accordingly.

Benefits of Balance Transfer Credit Cards

There are several benefits associated with using a balance transfer credit card:

Consolidate Multiple Debts

One of the primary benefits of a balance transfer credit card is that it can help you consolidate multiple debts into one account. This simplifies your finances and makes it easier to keep track of payments and due dates.

Lower Interest Rates

The low introductory interest rates offered by balance transfer credit cards can help reduce your overall monthly payments while allowing you to pay off more principal on your debts.

Fixed Monthly Payments

A fixed monthly payment schedule helps ensure that you stay on track with paying off your debts over time, which can improve your financial standing in both short and long term.

Improved Credit Score

Using a balance transfer credit card responsibly can help improve your credit score by paying down debts faster and making on-time payments.

Best Balance Transfer Credit Cards in Canada

Before applying for a balance transfer credit card, you need to consider the features and benefits that best suit your financial goals. Here are some of the top balance transfer credit cards in Canada:

MBNA Platinum Plus Mastercard

The MBNA Platinum Plus Mastercard is known for offering the longest interest-free period of any balance transfer credit card in Canada. With this card, you get 0% interest rate for up to 12 months on transferred balances (excluding fees). After the promotional period ends, the standard interest rate is 19.99%. The annual fee for this card is $0.

Tangerine Money-Back Credit Card

Tangerine Money-Back Credit Card offers a competitive interest rate of 1.95% on transferred balances for six months. This introductory offer is available only to new applicants and must be completed within the first thirty days of account opening. Thereafter, the standard interest rate in place will be on purchases and cash advances at 19.95%. The annual fee for this card is $0.

American Express Essential Credit Card

The American Express Essential Credit Card offers an introductory interest rate of 1.99% on transferred balances for six months with no annual fee. After that promotional period ends, you’ll pay a standard interest rate at 8.99%.

Things to Consider Before Applying For A Balance Transfer Credit Card

Before applying for a balance transfer credit card, there are several things to keep in mind:

Your credit score matters

To qualify for many balance transfer credit cards, you typically need a good or excellent credit score – at least over 600 or higher.

Fees and charges

While promotional rates may seem enticing, it’s important to read the fine print regarding fees and charges. Balance transfer fees can be as high as 3% to 5%. Therefore, you must consider the fees involved in transferring your balance from one card to another.

Repayment terms & schedule

Before committing to a balance transfer credit card, make sure that you are comfortable with the repayment terms and schedule included in your new account. Be aware of what happens after the introductory promotional period ends.

Conclusion

A balance transfer credit card may be an excellent option if you’re looking for a way to consolidate multiple debts into one account while reducing your overall interest rate. It’s essential to understand the terms and conditions associated with different offers before selecting a balance transfer credit card that aligns with your financial goals. Remember, while balance transfers can help you save money on interest in the short term, paying down debt is most effective when it becomes part of an overall debt repayment strategy.

FAQs

What is a balance transfer credit card?

A balance transfer credit card allows you to transfer your existing credit card debt to a new credit card with a lower interest rate. This can help you save money on interest charges and pay off your debt faster.

How does a balance transfer work?

When you apply for a balance transfer credit card, you’ll be asked to provide information about the credit cards with balances that you want to transfer. Once approved, the balance from those cards will be transferred to your new card, and you’ll need to make payments on the new card. Be sure to read the terms and conditions carefully, as there may be fees or other restrictions associated with the transfer.

Can I transfer any type of debt to a balance transfer credit card in Canada?

Generally speaking, you can only transfer credit card debt to a balance transfer credit card in Canada. You may not be able to use this type of card to consolidate student loans, car loans, or other types of debt.

What are some of the benefits of using a balance transfer credit card?

Some benefits of using a balance transfer credit card include saving money on interest charges, simplifying your payments by consolidating multiple debts into one payment, and potentially improving your credit score by paying down your debts more quickly.

Are there any disadvantages or risks associated with using a balance transfer credit card in Canada?

Yes, there are some potential risks associated with using a balance transfer credit card. These can include high fees associated with the transfer (such as an upfront fee), penalties for late payments or exceeding your limit, and potentially damaging your credit score if you are unable to make payments on time.

How do I compare different balance transfer credit cards in Canada?

When comparing different options for balance transfer credit cards, you’ll want to look at factors such as the interest rate (both on the balance transfer and on purchases), the length of any promotional period, any fees associated with the transfer or card use, and any rewards or other benefits offered by the card. Be sure to read the fine print carefully before making a decision.

How long does it take for a balance transfer to be completed?

The process of completing a balance transfer can vary depending on the credit card issuer and your circumstances. In general, it may take a few business days for the transfer to be approved and processed, but it could take longer if there are any issues with your application or if your existing creditors need to approve the transfer.

Can I still use my old credit cards after transferring my balances?

Yes, you can continue using your old credit cards after transferring your balances, but be aware that doing so could potentially negate some of the benefits of using a balance transfer credit card in Canada. You’ll want to avoid racking up new charges on those cards while you’re trying to pay off your transferred debt.

Is it possible to pay off a balance transfer credit card early?

Yes, most balance transfer credit cards in Canada allow you to pay off your debt early without penalty. Doing so can help reduce your overall interest charges and shorten the amount of time it takes you to become debt-free.

Are there any alternatives to using a balance transfer credit card in Canada?

Yes, there are other options for consolidating debt in Canada besides using a balance transfer credit card. These may include personal loans or lines of credit from banks or online lenders. Be sure to compare all of your options before making a decision that’s right for you.

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