Credit Card Balance Transfers: What You Need To Know

Every now and then, you may receive a letter from a bank or see a promotional offer for a credit card balance transfer. The idea is that you move the balance from a higher-interest credit card to another, which has a lower interest rate for a specified time period.

While it’s always ideal to pay off your credit card balance in full every month, credit card balance transfers can be a useful tool in some situations, and especially if you’re managing some debt.

In this guide, we’ll discuss credit card balance transfers, including what to be aware of before you decide to take advantage of an offer, and some of the best-available balance transfer offers in Canada.

What Is a Credit Card Balance Transfer?

While credit cards date back to the 1950s, balance transfers are a relatively newer invention. They were developed between the late 1980s and early 1990s to attract new credit card customers with the promise of lower interest rates.

The name “balance transfer” refers to the process of transferring the higher-interest balance from one or more credit cards to a new or existing card with a balance transfer offer, which comes with a much lower interest rate. The idea is that you save money on the higher interest that you’d otherwise be paying on your card with a balance.

With balance transfers, your annual interest rate (APR) will be much lower than the average market rate, with rates as low as 2%, 0.9%, or even 0% APR for a set duration of time, usually anywhere between six and 12 months. There’s also usually a nominal fee of 1–3% when you transfer the balance.

Sometimes, balance transfers are used to buy yourself some extra time to pay off an outstanding balance that you’ve accrued. 

You may also find yourself in a situation in which you need to make a large purchase, such as for an unexpected renovation that can’t wait, but don’t have access to the funds required.

A balance transfer offer may be the most affordable option at your disposal, since you can pay for the expense with a credit card, and then transfer it to a different card with a lower interest rate for a set period of time.

Again, we always recommend paying off your credit cards on time and in full as often as possible. However, if you’re carrying a high-interest balance on a credit card, or if you’re facing an unexpected large expense without other ways to cover it, then a balance transfer may…