If you’ve been carrying debt on your credit card that you can’t seem to pay off because of the monthly interest charges, you should consider using a balance transfer credit card to help you eliminate your debt once and for all.
A balance transfer card is a credit card that offers an ultra-low introductory interest rate (e.g. 1.99%) for a set promotional period (e.g. six months). When you transfer a balance onto this credit card, you’ll pay only this low interest rate for the promotional period. After the promotional period ends, your card’s interest rate will rise back to its standard levels, so it’s important that you pay off all or most of your debt before that happens.
Below, we’ve compiled our picks of Canada’s best balance transfer credit cards for 2020.
The best balance transfer credit cards in Canada
|Credit Card||Balance Transfer Offer||Annual Fee|
|BMO Preferred Rate Mastercard (VIEW)||3.99% for first nine months||$20 (waived for 1st year)|
|PC Financial Mastercard (VIEW)||0.97% for first 6 months||$0|
|Tangerine Money-Back Card (VIEW)||1.95% for first 6 months||$0|
|BMO CashBack Mastercard (VIEW)||1.99% for first 9 months||$0|
|BMO Air Miles Mastercard (VIEW)||1.99% for first 9 months||$0|
|Can’t choose? Find the right card for you here.|
BMO Preferred Rate Mastercard
Read in more detail (+/-)
The BMO Preferred Rate Mastercard has the lowest fixed interest rate on purchases of any BMO credit card at 12.99% and offers cardholders with a strong 3.99% promotional offer on balance transfers for the first nine months. In order to qualify for this card, you’ll need an annual income of $15,000 and a credit score of 660 or more.
Why we like it:
While the 3.99% promotional rate on balance transfers isn’t objectively the lowest, the promotional rate lasts for a lengthy nine months (which is three months longer than what most of the other cards on this list offer). Plus, even after the nine-month promotional period ends, the balance transfer rate will increase to a competitive fixed rate of just 12.99% as opposed to 19.95% or 22.99% – making it the right fit if you need more time to pay off your credit card debt than the nine months allocated as part of the promotional period.
In exchange for a nominal $20 annual fee, this card provides a number of built-in benefits, including free extended warranty coverage and protection against unauthorized use in instances your card is stolen and used for purchases you didn’t authorize – which means you can enjoy some added peace of mind as you consolidate your debt.
Best balance transfer credit cards – honourable mentions
Below, we’ve listed rewards credit cards that offer great balance transfer promotions.
We’ve categorized them as honourable mentions because they aren’t full-fledged low interest cards – so once their promotional periods end, the interest rate on balance transfers will increase sharply to between 19.95% or 22.9% (instead of just 13.99% like the BMO Preferred Mastercard covered above).
PC Financial Mastercard
Read in more detail (+/-)
The PC Financial Mastercard has no annual fee and a balance transfer offer of 0.97% for the first six months with no additional transfer fees – that’s objectively one of the best balance transfer offers on the market. To qualify for the offer, you must be a new cardholder and must transfer a balance within your first 90 days.
On top of being an excellent balance transfer credit card, the PC Financial Mastercard is also a rewards credit card that’ll earn you PC points on all your new purchases and is a great fit for anyone who spends big at stores where President’s Choice products are sold like Loblaws, No Frills, and Shoppers Drug Mart.
While this card doesn’t have a minimum annual income requirement, if you earn at least $60,000 or $80,000, you could quality for the higher tier PC Financial Mastercards and earn even more points on your everyday spending. On a final note, it’s important to highlight that once the balance transfer offer ends, this card’s interest rate increases to 22.97%.
Tangerine Money-Back Credit Card
Read in more detail (+/-)
The Tangerine Money-Back Card is one of the best cash back credit cards in Canada that also happens to offer a competitive balance transfer offer. New cardholders can pay 1.95% on transferred balances for the first six months (after which the rate will increase to 19.95%).
While you won’t earn any rewards on your balance transfer, you’ll get cash back on your regular purchases at a rate of 2% in up to three bonus spending categories and 0.5% on everything else. You can choose your own bonus categories from a total of ten options (which includes gas, groceries, restaurants, hotels and more). This card has an income requirement of $12,000 and charges no annual fee.
The slightly upgraded Tangerine World Mastercard also offers the same balance transfer offer. The Tangerine World is almost identical to the Tangerine Money-Back Card with the exception of a few perks (mobile device and rental car insurance) and a higher income requirement of $60,000.
BMO CashBack Mastercard
Read in more detail (+/-)
BMO’s entry-level rewards card, the BMO CashBack Mastercard, has no annual fee, no income requirements, and comes with a competitive balance transfer offer of 1.99% – letting you consolidate your past debts and pay them off faster.
The balance transfer offer lasts for nine months and is exclusively for new cardholders. The card’s regular interest rate is 19.99% though, which is what you’ll owe on new purchases you make on the card. Meanwhile, you’d owe 22.99% any balances transferred after nine months.
Balance transfer offer aside, this card lets you rack up a whopping 5% cash back on your everyday purchases for the first three months and up to 3% on groceries after that.
The same 1.99% nine-month balance transfer offer is also available on a handful of BMO’s other no fee rewards credit cards including the BMO Air Miles Mastercard and the BMO Rewards Mastercard.
9 things you need to know about credit card balance transfers
1. What is a balance transfer (and what are its advantages)?
A balance transfer is what it sounds like: it’s the transfer of a balance from one credit card to another. A popular strategy for addressing credit card debt, the goal is usually to move your outstanding balance from a card that charges a high-interest rate to a new card with a far-lower interest rate, and in the process, pay off your balance faster.
Simply put, it’s like you’re using a new card to pay off an older one.
If you owe money on multiple credit cards, a balance transfer can also help you stay on top of your debts by consolidating all your balances onto just one card. So, instead of having to juggle several card bills every month (each with their own billing cycles, due dates, and dollar amounts), you’ll have just one balance to keep track of and pay.
2. The importance of balance transfer offers
To take full advantage of this strategy, you’ll want to transfer your high-interest credit card debt to a balance transfer credit card. These cards come with special promotions that let you pay an ultra-low interest rate (sometimes as low as 0%) for a limited period of time (usually around six to ten months).
Balance transfer cards provide an excellent opportunity to make a real dent in your debt because more of your payments will be going towards the principal and not interest.
3. Remember, balance transfer offers are only available for a limited time
It’s important to reiterate that balance transfer offers aren’t permanent and are offered for a limited period, after which the card’s regular interest rate will come into effect. For example, the Scotiabank Value Visa, currently one of Canada’s best balance transfer cards, offers a 0.99% balance transfer promotion for a limited period of six months. After this six-month period ends, the promotional interest rate of 0.99% expires and any remaining balance you owe will be subject to the credit card’s regular interest rate, which in the case of the Scotiabank Value Visa is 12.99%.
The promotional nature of balance transfer offers means it’s important to keep an eye on when your transferred balance will be subject to the regular interest rate and to try to pay it off before the promotional period ends. It’s also important to consider a balance transfer card with a low regular interest rate, so if you do need more time to clear off your debt, you can still be in a position to save in the long run.
4. New purchases on a balance transfer card will be subject to a higher rate
While balance transfer credit cards are a great way to reduce the interest you pay on past debts, that’s not the case with new purchases. When you charge new purchases to your balance transfer card, they’ll subject to the card’s regular interest rate – not its special promotional rate. For example, if you make a new purchase on the Scotiabank Value Visa, that purchase will be subject to the card’s regular interest rate of 12.99%, not its promotional rate of 0.99%. For this reason, it’s a good idea to avoid charging new purchases to your credit card while you’re paying off your transferred balance.
Further to this point, any payments you make towards your credit card bill will go towards paying off your transferred balance first and not new purchases. That means you’ll have to completely pay off your old transferred balance before you can chip away at a new balance you’ve racked up.
Remember, the goal of a balance transfer is to help you pay off older debts. So, until you’ve wiped out your old debts, you’ll want to tread carefully and avoid using credit to make new purchases.
5. How does a balance transfer work?
You can usually set up a balance transfer online through your bank’s website or app, but depending on the bank, you may need to dial the phone number on the back of your card and talk with a customer service representative to get it done.
When requesting a balance transfer, you must provide the account information of the card you’ll be moving the balance to as well as the amount you want to transfer. The amount you transfer can be no larger than the credit limit of your new card. Depending on the card, you may also only be allowed to transfer up to a certain amount of your credit limit (i.e. 50% of your total credit limit).
You can transfer balances between credit cards from different financial institutions, but in almost all cases, you can’t move balances between cards from the same bank. You’ll usually have to pay a balance transfer fee as well (though, it’s typically a nominal 2% or 3% of your transferred amount). Lastly, moving a balance isn’t instant and may take upwards of seven to ten business days for the proper approvals to go through and the transferred balance to appear on your new card.
6. Balance transfer fees
As we touched on above, most balance transfer credit cards will charge a balance transfer fee. Usually charged upfront, this one-time fee does vary by bank (and sometimes by card) and is usually either a flat fee or equal to a percentage of the balance you’re transferring.
While nobody likes paying fees, balance transfer fees pale in comparison to a credit card’s regular interest rate. Paying a 3% balance transfer fee and 0% interest for ten months is far better than owing 19.99% in interest. Nonetheless, it’s important to consider this fee along with the promotional interest rate and the dollar amount you’re transferring when deciding which balance transfer card is right for you.
Below, we break down the balance transfer fee by some major credit cards and banks.
*Information is based on general rates, and may vary depending on the cardholder and offer terms. Check with your card issuer for fee details.
|Credit card / Bank||Balance transfer fee|
|MBNA True Line and True Line Gold||
7. Is a balance transfer worth it?
A balance transfer can be an excellent way to temporarily reduce your interest rate and pay off your debt quicker. You could easily save hundreds of dollars in interest charges by taking advantage of a balance transfer.
Balance transfers are almost always worth it if you’re transferring a balance that you’re confident you can pay off during the promotional period, and at the same time, you’re sure that you won’t charge new purchases to the card.
That said, there are some scenarios when a balance transfer may not be worth it. If you have a low credit score, for example, you may not be approved for a balance transfer credit card in the first place. Second, while some rewards credit cards come with balance transfer offers, their interest rates will increase sharply to 19.99% after the promotional period ends. So, if your transferred balance is larger than you can pay off during the promotional period, you should avoid rewards cards with balance transfer offers and instead consider a low interest card (like the Bm) that has a low regular interest rate even after its balance transfer offer ends.
8. Do balance transfers affect your credit score?
A balance transfer can generally help to improve your credit score over the long term. That’s because a balance transfer can help you pay back your outstanding credit card debts much faster, which in turn, will reduce your credit utilization ratio. One of the biggest determinants of your credit score, credit utilization refers to the amount you owe on your credit card relative to your total credit limit, and typically the lower this ratio and the less you owe, the better your score.
In the process of undergoing a balance transfer, however, you may face a few negative (albeit, temporary) dings to your credit score. For example, when applying for a new balance transfer credit card with a low interest rate, you’ll receive an inquiry on your credit report – like you would when you apply for any new credit card. That said, applying for a new balance transfer card won’t have a lasting impact on your credit report and your score can fully recoup in a few months provided you make payments on time.
9. You won’t earn rewards on a balance transfer
Most credit cards, even those that offer points or cash back on your everyday purchases, will not offer rewards for transferred balances. Since your goal when transferring a balance is to achieve a lower interest rate, not earn rewards, this shouldn’t be a deal breaker.
Balance transfer example
Now that we’ve covered how a balance transfer works in detail, let’s walk through a scenario to show just how much you can save with a balance transfer – in real dollar terms.
Let’s say you:
- Currently owe a balance of $3,000 on a rewards credit card with a 19.99% annual interest rate
- Every month, you diligently pay $300 towards your bill
Here’s a side-by-side comparison of what would happen if you choose to either: 1. Stick with the same rewards credit card or 2. Move your debt over to a balance transfer credit card with a 0% promotional interest rate for 10 months and a 1% transfer.
|1. Rewards credit card||2. Balance transfer credit card|
|Interest rate||19.99%||0% for 10 months|
|Your monthly payments||$300||$300|
|Total interest owed||$309||$0|
|Balance transfer fee||N/A||$30|
|Months until your balance is paid||12||10|
Based on this simplified example, you’d save $279 in fees ($309 – $30) and pay off your balance a full two months faster by transferring your debt to the 0% balance transfer credit card. That’s a substantial amount of money.
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