Canada's best balance transfer credit cards at a glance
Our methodology: how we choose the best credit cards
Ratehub.ca evaluates the best credit cards by considering overall consumer value and suitability for various types of consumers. Our evaluation methodology incorporates factors such as the card’s annual fee, rewards earning rates, ease-of-use, welcome or promotional offers, approval rates, eligibility criteria, and redemption choices. We have also considered the pros and cons of each card to help you determine which case best suits your financial needs and spending habits.
What is the best balance transfer credit card?
The best balance transfer credit card is one that will offer you no interest for an extended period (typically six to ten months) while also offering a low annual fee (or a waived annual fee for the first year). We chose the MBNA True Line Mastercard, which offers no interest for a full year helping you pay down debt or eliminate it all together.
Can I do a balance transfer to a card from the same bank?
Unfortunately not. While you can certainly transfer your balance to a card from a different financial institution, your current bank will generally not allow you to transfer your balance to one of their own low interest or balance transfer cards.
Does it look bad to do a balance transfer?
No, it doesn't. Because applying for a balance transfer card is a way to help improve credit, they won't hurt your credit score and credit bureaus don't consider them a red flag. That being said, any credit card application comes with a credit check which could ding your score lightly and temporarily, but a few months of responsible card usage will straighten it back out.
Do all providers offer balance transfers?
Most providers offer balance transfers, but it's best to check with your individual issuer to find out if they have balance transfer rates.
- Best overall balance transfer credit card: MBNA True Line Mastercard
- Honourable mention for best balance transfer credit card: CIBC Select Visa
- Best low interest balance transfer credit card: BMO Preferred Rate Mastercard
- Best cash back balance transfer credit card: BMO CashBack Mastercard
- Best balance transfer credit card for students: Scotiabank Value Visa
A guide to balance transfers in Canada
What is a balance transfer?
A balance transfer is what it sounds like: it’s the transfer of a balance from one credit card to another. This is a popular strategy for managing credit card debt, with the main objective to shift your outstanding balance from a card with a high interest rate to a new card with a far-lower interest rate. This allows you to pay off your balance more quickly and in the process pay less interest.
How does a balance transfer work?
You can usually set up a balance transfer online through your bank’s website or app. However, depending on the bank, you may need to call your bank and talk with a customer service representative.
When requesting a balance transfer, keep in mind:
- 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).
It is important to note that moving a balance is not instant - it 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. Keep in mind that all new purchases on a balance transfer card will be subject to the standard higher interest rate, as the promotional rate only applies to the existing balance you transferred to the card and not anything added afterwards.
Balance transfer fees
As we touched on above, most balance transfer credit cards will charge a balance transfer fee. This one-time fee varies 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.
How much can I save with a balance transfer?
Transferring a large credit card balance to a card with a lower interest rate can lead to significant savings, especially if you focus on paying off the balance during the promotional period.
For instance, imagine you have a $6,000 balance on a credit card with a 20% APR, and you get approved for a balance transfer credit card offering 0% interest for the transferred balance for the first 12 months, with a 2% transfer fee.
By moving your balance to the new card and diligently paying it off during the promotional period, your only expense will be the $120 transfer fee (2% x $6,000). In comparison, if you continued to pay off the same balance on your old card over those same 12 months, you would have spend $1,200 in interest ($20% x $6,000). This results in overall savings of $1,080 ($1,200 - $120).
Actual savings may vary depending on factors such as your current monthly payment amounts, planned payment amounts on the new balance transfer card, timing, and card terms.
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 allows you to repay your outstanding credit card debts much faster, which in turn, will reduce your credit utilization ratio. Credit utilization, a major factor in determining your credit score, refers to the amount you owe on your credit card relative to your total credit limit. Generally, a lower ratio and smaller outstanding balances can lead to a better credit score.
However, in the process of undergoing a balance transfer, you may face a few temporary effects on your credit score. For example, when you apply for a new balance transfer credit card offering a lower interest rate, you’ll receive an inquiry on your credit report, similar to the process for applying for any new credit card. That said, applying for a new balance transfer card won’t have a lasting impact on your credit report. With consistent on-time payments, your credit score can fully recoup in a few months.
Balance transfer example
Now that we’ve covered how a balance transfer works, let’s walk through a scenario that demonstrates the savings achievable with a balance transfer. Let’s say you:
- Currently hold 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 balance
Here’s a side-by-side comparison of what would happen if you choose to either: 1. Continue with your existing rewards credit card or 2. Transfer your debt to a balance transfer credit card with a 0% promotional interest rate for 10 months and a 2% transfer fee.
Based on this simplified example, you’d save $249 in fees ($309 – $60) 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.
Pros and cons of balance transfer credit cards:
Benefits of balance transfer credit cards
- Better interest rates. The major advantage of balance transfer credit cards is that their significantly lower interest rates compared to standard credit card. This is especially true when you consider their promotional offers. Unlike the average interest rate of most credit cards (19-20%), certain balance transfer credit cards provide a period of zero interest.
- Easier to pay off debt. Thanks to the remarkably low interest rates offered by balance transfer credit cards, you'll be able to focus entirely on paying off your existing debt without the added stress of accumulating more interest on the principal. However, it is critical to establish a reliable repayment plan to ensure that you don't collect interest once the promotional period ends.
Drawbacks of balance transfer credit cards
- Not made for new purchases. While you can certainly use your balance transfer credit card to make new purchases, it's not recommended. The primary allure of the card - its ultra-low interest rate - only applies to transferred debt, not any new purchases/transactions. New purchases will be subject to the regular interest rate, not the promotional one. So until you've squared away your debt, you probably don't want to add to your existing balance.
- Limited rewards. Unlike rewards cards designed to incentivize spending, balance transfer cards prioritize debt repayment. Because of this, you're unlikely to see many rewards or extra perks with these cards. Once you've paid off your outstanding balance and built up your credit, you might want to switch over to a rewards or cash back credit card to begin earning points or cash back.
- Promotional interest rates are time sensitive. Although the ultra-low interest rate may seem like a dream come true to someone struggling to pay off credit card debt, it's important to remember that it is only valid for a specific duration. That means its imperative to ensure that you can clear your debt within that timeframe; otherwise, you could end up accumulating interest again.
Alternatives to a balance transfer credit card
If you prefer not to get a balance transfer credit card, one alternative is to seek out a line of credit and use it to pay off your credit card balance.
Lines of credit typically charge lower interest rates than credit cards, though still higher than what would be offered on a balance transfer credit card. An important thing to note with line of credits, is that rates can change depending on the bank's prime lending rate.