Best balance transfer credit cards in Canada for 2024

Fact Checked: Scott Birke

🗓️

Updated: July 17, 2024

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Balance transfer credit cards allow you to transfer and merge debts onto a new, low interest credit card to save money. They give you with a low interest rate or interest-free way to pay off your debt and re-start your financial life.

According to Statistics Canada1, Canadian household credit card debt increased by 7.49% from June 2023 to December 2023. If you find yourself in a similar situation, here's Money.ca's list of the best balance transfer credit cards in Canada.

Best balance transfer credit card in Canada

MBNA True Line Mastercard

Apply now

4.0

0% intro rate

Welcome offer

Good

Suggested credit score

Get a 0% promotional annual interest rate (“AIR”)† for 12 months on balance transfers✪ completed within 90 days of account opening, with a 3% transfer fee.

Pros

  • Solid welcome offer: 12 months of 0% APR† on balance transfers✪ made within the first 90 days (3% transfer fee applies)

  • No annual fee or minimum income requirement

  • Low standard interest rate of 12.99% for all new purchases charged to the card

  • Some extra perks like fraud protection and a discount on car rentals

Cons

  • 3% balance transfer fee is comparatively high

  • Very high cash advance interest rate of 24.99%

  • No insurance benefits

  • Can’t transfer a balance owed to either MBNA or TD

Eligibility

Recommended Credit Score

Good

The best balance transfer credit card for its 0% rate and long payoff period.

Pros

  • Solid welcome offer: 12 months of 0% APR† on balance transfers✪ made within the first 90 days (3% transfer fee applies)

  • No annual fee or minimum income requirement

  • Low standard interest rate of 12.99% for all new purchases charged to the card

  • Some extra perks like fraud protection and a discount on car rentals

Cons

  • 3% balance transfer fee is comparatively high

  • Very high cash advance interest rate of 24.99%

  • No insurance benefits

  • Can’t transfer a balance owed to either MBNA or TD

Eligibility

Recommended Credit Score

Good

Promotional annual interest rate† (a 3% transfer fee applies) for 12 months on any balance transfer✪ completed within 90 days of opening the account.

0%

This card is made from 100% recycled plastic

100%

Purchase APR

12.99%

Balance Transfer Rate

17.99%

Cash Advance APR

24.99%

Annual Fee

$0

Foreign Transaction Fee

2.50%

  • Why the MBNA True Line® Mastercard® is a best balance transfer credit card

    +

    The MBNA True Line® Mastercard® offers the most sought-after combination of features in a balance transfer promo: 0% interest for a full 12 months. To take advantage of the best balance transfer offer in Canada, new cardholders can make balance transfers up to their available credit limit within 90 days of opening their account. After the 12-month promotional period expires, the interest rate only increases to 17.99%. This is far more manageable than the 20+% post-promotional rate typical of other balance transfer cards, and it’s a softer landing for those that are unable to pay off all their debt during the promo period. 12.99% is also the card’s purchase interest rate, so it qualifies as a strong low-interest card as well, particularly given the fact that it has no annual fee.

    The card’s only weakness is its relatively high promotional balance transfer fee, a one-time charge of 3% of the amount transferred (minimum fee of $7.50).

    The Math: If you have a debt of $5,000, to pay off your balance within 12 months using MBNA's True Line Mastercard with a 0.00% APR for the first 12 months and a 3% transfer fee, you would owe a 3% fee of $150. You would need to pay approximately $429.17 per month to pay off the total amount owed within 12 months.

    That 3% fee is higher than the fees charged by most of the competing cards featured on this page, and it can amount to a significant upfront cost depending on the size of the balance you’d like to transfer.

    What about the MBNA True Line Gold credit card?

    The MBNA True Line Gold qualifies as one of the best low interest credit card in Canada with balance transfer offer, but it doesn't make it the best for balance transfers.

    The MBNA True Line Gold charges 10.99% regularly and 13.99% on balance transfers. However, their balance transfer fee is only 1%. Let's do the math though just so you can see how much more you'll pay with a low interest card with a lower balance transfer fee.

    The math: To pay off your $5,000 balance within 12 months using a credit card with a low 13.99% APR, you would need to pay $453.08 per month to pay off the total amount owed, which includes the transfer fee ($50).

    Which is a better offer: If you can pay off your debt in 12 months, the MBNA True Line saves you $286.92 when compared to the MBNA True Line Gold. However, if you go over the 12 month threshold, you may be better served with the MBNA True Line Gold.

    Key features of this MBNA credit card balance transfer promotion:

    Promotional balance transfer rate: 0%

    Promotion length: 12 months

    Post-promotional balance transfer rate: 17.99%

    Purchase interest rate: 12.99%

    Cash advance rate: 24.99%

    Annual fee: $0

    Terms and conditions apply.

    This offer is not available for residents of Quebec.

    Sponsored advertising. MBNA is a division of The Toronto-Dominion Bank (TD) and TD is not responsible for the contents of this site including any editorials or reviews that may appear on this site. For complete information on this MBNA credit card, please click on the “Apply Now” button.

    The Toronto-Dominion Bank is the issuer of this credit card. MBNA is a division of The Toronto-Dominion Bank. ®MBNA and other-trademarks are the property of The Toronto-Dominion Bank.

Best Scotiabank balance transfer card

Scotiabank Value Visa

Apply now

4.0

0% intro rate

Welcome offer

Fair

Suggested credit score

0% introductory interest rate on balance transfers for the first 10 months (12.99% after that; annual fee $29), plus no annual fee for the first year.¹

Expires

Oct 31, 2024

Pros

  • Lengthy introductory APR on balance transfers

  • A great low rate everyday

  • Available to applicants with average credit

Cons

  • No rewards program

  • Insurance coverage is an optional extra

  • Carries an annual fee

Eligibility

Recommended Credit Score

Fair

Required Annual Personal Income

$12,000

Pros

  • Lengthy introductory APR on balance transfers

  • A great low rate everyday

  • Available to applicants with average credit

Cons

  • No rewards program

  • Insurance coverage is an optional extra

  • Carries an annual fee

Eligibility

Recommended Credit Score

Fair

Required Annual Personal Income

$12,000

Purchase APR

12.99%

Balance Transfer Rate

12.99%

Cash Advance APR

12.99%

Annual Fee

$29

Foreign Transaction Fee

2.50%

  • Why the Scotiabank Value® Visa* Card is a best credit card for balance transfer

    +

    The Scotiabank Value® Visa* Card is another credit card with low interest rates. The card offers a balance transfer promotion of 0% introductory interest rate on balance transfers for the first 10 months (12.99% after that; annual fee $29).2 Plus no annual fee in the first year2 Most cards’ balance transfer interest rates jump up to 20%+ after the promo ends. So this might be a good card for you even if you’re not 100% confident that you can pay off your transferred balance within the six months allotted.

    Note that the introductory interest rate on balance transfers applies to new credit card accounts only.

    Key features of this Scotiabank balance transfer card:

    Annual fee: $29 (waived in the first year)

    Promotional balance transfer rate: 0% interest for the first 10 months, 12.99% after that

    Free additional cardholder

    Optional insurance: Life, Critical illness, hospitalization, and disability

Conditions Apply. Visit here for the Scotiabank Value® Visa* Card to learn more. *See Card Provider's website and Card Application for complete card details, terms and current offers. Reasonable efforts are made to maintain accuracy of information.

Best balance transfer credit card for cash back

BMO CashBack® MasterCard®

Apply now

4.0

5% cash back

Welcome offer

Good

Suggested credit score

Get 5% cash back in your first 3 months*

Expires

Nov 30, 2024

Pros

  • No Annual Fee: A rare find in Canada for a cash back card

  • A generous 3% cash back on groceries (up to $500 monthly)

  • Easily redeem from $1, set up automatic redemptions, or use as a statement credit

  • Additional perks include discounts on rentals, free supplementary cards and show discounts

Cons

  • Outside of groceries and recurring payments, the standard earn rate drops to 0.5%

  • Monthly caps on top earn rates for groceries and recurring payments

  • A 2% balance transfer fee applies

  • The interest rate on the remaining balance transfer amount increases after the introductory period

Eligibility

Recommended Credit Score

Good

Required Annual Personal Income

$15,000

Pros

  • No Annual Fee: A rare find in Canada for a cash back card

  • A generous 3% cash back on groceries (up to $500 monthly)

  • Easily redeem from $1, set up automatic redemptions, or use as a statement credit

  • Additional perks include discounts on rentals, free supplementary cards and show discounts

Cons

  • Outside of groceries and recurring payments, the standard earn rate drops to 0.5%

  • Monthly caps on top earn rates for groceries and recurring payments

  • A 2% balance transfer fee applies

  • The interest rate on the remaining balance transfer amount increases after the introductory period

Eligibility

Recommended Credit Score

Good

Required Annual Personal Income

$15,000

Cardholders earn 3% (up to a monthly max of $500) cash back on groceries

3%

Cardholders can earn 1% (up to $500 per month) on any recurring bill payments*

1%

Cardholders can earn 0.5% (no monthly max) on all other eligible purchases*

0.5%

Purchase APR

20.99%

Cash Advance APR

22.99%

Annual Fee

$0

  • Why the BMO CashBack® Mastercard® is a best balance transfer credit card

    +

    New cardholders of the BMO CashBack® Mastercard® pay an introductory 0.99% on transferred balances for up to 9 months, with a 2% fee*. You can transfer at any time in the first nine months.

    You also get 3% cash back on grocery purchases*, 1% cash back on recurring bill payments* and 0.5% unlimited cash back on all other purchases*.

    This is the perfect card for families with young kids who want to take their time to pay off debt because their cash flow is so tight; families will also appreciate the 3% cash back on groceries*.

    Key features of this BMO credit card balance transfer offer:

    Welcome bonus: Get up to 5% cash back in your first three months, plus a $50 cash back bonus (when you spend $6,000) in your first year – that’s up to $175 cash back in your first year!

    Promotional balance transfer rate: 0.99% introductory interest rate on Balance Transfers for 9 months, 2% fee applies to balance amounts transferred*.

    Additional perks: Car rental discount*; free additional cards; extended warranty*; purchase protection*.

    *Terms and conditions apply

    †Based on a comparison of the non-promotional grocery rewards earn rate on cash back credit cards with no annual fee as of January 4, 2023.

Best balance transfer credit card for rewards

Tangerine Money-Back Credit Card

Apply now

5.0

10% back

Welcome offer

Good

Suggested credit score

Get 10% cash back on up to $1,000 in everyday purchases made within 2 months. Pay only 1.95% balance transfer interest for the first 6 months.

Expires

Nov 1, 2024

Pros

  • No annual fee

  • Choose the spending categories where you want to earn the most cash back

  • Unlimited cash back—no maximum spending limit for any purchase category

  • Cash back is paid out monthly rather than annually

  • Periodically includes a special welcome offer where you can get extra cash back

  • 1.95% interest on balance transfers for the first 6 months (1% transfer fee applies)*

Cons

  • Regular cash back rates are still lower than what you can get from a card with an annual fee

  • Limited extra perks or benefits beyond the cash back and balance transfer promotion

  • Generally not a good fit for shopping at warehouse clubs or wholesale grocers like Costco or Walmart

  • Tangerine does not have any physical bank branches

Eligibility

Recommended Credit Score

Good

Required Annual Personal Income

$12,000

Pros

  • No annual fee

  • Choose the spending categories where you want to earn the most cash back

  • Unlimited cash back—no maximum spending limit for any purchase category

  • Cash back is paid out monthly rather than annually

  • Periodically includes a special welcome offer where you can get extra cash back

  • 1.95% interest on balance transfers for the first 6 months (1% transfer fee applies)*

Cons

  • Regular cash back rates are still lower than what you can get from a card with an annual fee

  • Limited extra perks or benefits beyond the cash back and balance transfer promotion

  • Generally not a good fit for shopping at warehouse clubs or wholesale grocers like Costco or Walmart

  • Tangerine does not have any physical bank branches

Eligibility

Recommended Credit Score

Good

Required Annual Personal Income

$12,000

Earn 2% cash back on 2 categories of your choice (e.g. groceries, recurring bills, gas, drug stores, etc.)

2%

Get a Tangerine Savings account and add a 3rd 2% cash back category.

3

Earn 0.50% on all your other everyday purchases.

0.5%

Variable APR

19.95% - 24.95%

Balance Transfer Rate

1.95%

Cash Advance APR

19.95%

Annual Fee

$0

Foreign Transaction Fee

2.50%

  • Why the Tangerine Money-Back Credit Card is one of the best balance credit cards

    +

    The Tangerine Money-Back Credit Card offers an advantageous balance transfer option to new cardholders, who pay just 1.95% interest on the balance for 6 months There’s a 1% transfer fee* and no “apply by” date. This perk complements the card’s flexible savings power, with the ability to choose any two of 10 purchase categories to earn 2% cash back in.

    People with large families who spend a bundle on groceries can pick the grocery category and start earning cash back, with other categories including common buys like restaurants, gas, home improvement, drug store purchases and recurring bills. Categories can be swapped at any time you like.

    It’s also possible to get a third cash back category by signing up for a Tangerine Savings Account and having your cash back deposited there. When you consider that you’ll also earn 0.5% cash back on everything else, the savings will quickly add up. Peripheral perks on the card are the absence of an annual fee, as well as standard 90-day purchase insurance and extended warranties by up to an additional year.

    Note that if you have an annual personal income of at least $60K, or household income of at least $100K, you should check out the Tangerine World Mastercard instead. It has no annual fee and offers the same balance transfer deal and flexible rewards as the Tangerine Money-Back Credit Card, but provides extra features including mobile device insurance, airport lounge access, and car rental insurance.

    *Terms and conditions apply

Best CIBC balance transfer card: CIBC Select Visa

CIBC Select Visa* Card

Apply now

5.0

Good

Suggested credit score

Transfer your credit card balance - Get 0% interest for up to 10 months with a 1% transfer fee† and a two year annual fee rebate†

Pros

  • 0% Balance Transfer rate for a generous 10 months with a low (1%) Balance Transfer fee†

  • 13.99%† Purchase Annual Interest Rate

  • A two year annual fee rebate†

  • No annual fee for additional cards (up to 3)

Cons

  • There are other low interest cards available with no annual fee whatsoever

  • Few distinguishing benefits beyond its interest rates

Eligibility

Recommended Credit Score

Good

Required Annual Household Income

$15,000†

Pros

  • 0% Balance Transfer rate for a generous 10 months with a low (1%) Balance Transfer fee†

  • 13.99%† Purchase Annual Interest Rate

  • A two year annual fee rebate†

  • No annual fee for additional cards (up to 3)

Cons

  • There are other low interest cards available with no annual fee whatsoever

  • Few distinguishing benefits beyond its interest rates

Eligibility

Recommended Credit Score

Good

Required Annual Household Income

$15,000†

Pay 0% interest for up to 10 months with a 1% transfer fee.†

0%

Purchase APR

13.99%†

Balance Transfer Rate

13.99%†

Cash Advance APR

13.99%†

Annual Fee

$29

  • Why the CIBC Select Visa* Card is a best credit card for balance transfer

    +

    The CIBC Select Visa* Card offers 0% interest on balance transfers for the first 10 months (1% transfer fee)† and after that, you can count on its consistent 13.99% Balance Transfer Annual Interest Rate, as well as 13.99% Cash Advance Annual Interest Rate and 13.99% Purchase Annual Interest Rate. Currently the only card on the market to offer such a balance transfer promotional rate, this card is perfect to help close the gaps created by your holiday spending, for instance. The card comes with a $29 annual fee, which is rebated for your first two years.†

    Aside from offering the best balance transfer promotional rate on the market, the card also provides cardholders with common carrier insurance and the option to pay for other insurances.

    Key features:

    Welcome bonus: Transfer your credit card balance - Get 0% interest for up to 10 months with a 1% transfer fee† and a two year annual fee rebate†

    Balance transfer promotion: 0% interest for up to 10 months with a 1% transfer fee

    Regular interest rate: 13.99% purchase annual interest rate, 13.99%† cash advance annual interest rate, and 13.99% balance transfer annual interest rate

    Additional perks: Common carrier insurance

    Annual fee: $29 (Two year annual fee rebate)†

    Terms and Conditions apply

    This balance transfer offer is only available at the time of your online application.† Simply tick the checkbox to select the balance transfer option when you’re filling out your application

    Once you take advantage of this offer, you will have a promotional rate balance on your account. As a result, you will lose your interest-free grace period on new purchases unless you pay your amount due, including any promotional rate balances, in full each month. While you will enjoy the promotional rate on the balances you transfer by using this offer, new purchases will be subject to the purchase interest rate.

Expert tip: How to use balance transfer credit card offers—the right way

Balance transfer credit cards have a lot of potential, but should be avoided if you struggle with responsible spending. If you are struggling with debt then a balance transfer credit card can be a handy tool to help you better navigate your financial situation and get back on your feet. When used correctly, a balance transfer credit card can relieve pressure by letting you catch up on late payments without having to struggle with the typical high credit card interest rates for a period of several months. However, you do need to be disciplined as a low or no-interest rate credit card can also make it tempting to spend more which may land you in a situation worse than what you started with.

Hannah Logan, Money.ca credit card, saving and travel expert

How much can you save with a balance transfer credit card?

Balance transfer credit cards are an easy way to save hundreds of dollars in interest charges as you pay off a debt.

Let’s say, for example, you owe $3,000 on a department store credit card at 19.99% interest. You decide to finally get serious about paying it off by transferring the debt to the CIBC Select Visa* Card and allocating $505 each month to repaying it. In that scenario you would manage to get rid of the debt within a 6-month period, paying nothing in interest charges and only $30 for the balance transfer fee. But if you had stuck with the department store credit card it would have taken you seven months to pay off with a $505 monthly payment, and you’d have paid about $186 in interest over the course of the repayment period. Doing the balance transfer would have saved you $156.

Department store card
CIBC Select
Starting balance
$3,000
$3,000
Interest rate
19.99%
0% (for 10 months)
Balance transfer fee
N/A
$30 (1%)
Monthly payment
$505
$505
Months to pay off your balance
7
6
Total fees and interest
$186
$30

By doing nothing more than applying for a different credit card and taking advantage of their promotional rate you’ve saved yourself $156 — and of course, the bigger the balance the bigger the savings.

While a balance transfer promotion is typically used for the transfer and consolidation of credit card debt, your card issuer might also allow you to transfer balances from loans or lines of credit, giving you more savings options. Be sure to check with your issuer if that’s something you’re seeking.

It’s also worth noting that card issuers typically do not allow balance transfers to earn rewards points or cash back, so don’t calculate that into your anticipated savings. There are, however, some cards that offer both a low-interest balance transfer promotion and the chance to earn cash back or rewards points on regular purchases.

How to choose the best balance transfer card

Before choosing a balance transfer credit card take your time to shop around and make sure you pick the right one for your financial situation. Read reviews, check rates and promotions, and calculate exactly how much you can save in interest and fees while responsibly repaying your debt. And don’t forget to read the fine print — not all balances can be transferred from one institution to the next.

Consider the promotional balance transfer rate

The whole point of getting a balance transfer credit card is to minimize the carrying cost of your debt, so the lower the interest rate the better.

Credit card balance transfer promotion length

The ultimate goal is to pay off all your transferred debt at your new balance transfer card’s low promotional interest rate. The special rate usually lasts between six and nine months, but occasionally a card will offer a deal for 10 months or longer.

Among all the balance transfer-related questions we get at Money.ca, about 40% of them are cardholders asking how they should go about either extending the promotional period on their card or re-transferring their balance to another card with another promotion. Six months might sound like plenty of time to pay off a balance, but it can fly by faster than you expect, so opt for the longest promotional period available. The longer the promotion length, the more time you have to pay off your debt once and for all.

If your balance transfer promotion is ending before you’ve paid off all your transferred debt, you can try to ‘surf’ your balance to another balance transfer card. But remember, there are a limited number of balance transfer deals in Canada, and it’s never guaranteed that another card issuer will accept your application. It’s best to maximize the first balance transfer promotion you get and pay off as much of your debt as you can during that period.

Post-promotional balance transfer interest rate

Some cards, like the Scotiabank Value® Visa* Card, still have relatively low rates even after their balance transfer promotional period ends. Other cards immediately bump the interest rate up to 19.99% or higher, which can be financially detrimental if you haven’t yet paid off the balance.

Check and check again if the interest rate after the promotional term ends will be applied to only the remaining balance after the promotional period, or if it will be retroactively calculated on the amount owing for the entire time you’ve had the card.

Credit card balance transfer fee

Most balance transfer cards charge a one-time balance transfer fee, typically between 1% to 3% per transferred balance. In most cases, the cost of the transfer fee will be added to your balance. For example, if you transfer $4,000 of credit card debt and are charged a 1% balance transfer fee you will be charged $40 and your new transferred balance will appear as $4,040 on your card.

Eligibility criteria and card issuer

The balance transfer card you have your eye on might require a minimum annual income, decent credit score, and a credit standing free of current bankruptcies or consumer proposals. Furthermore, the card issuer likely will not allow you to transfer a balance from one of its own credit cards, or the credit cards of its subsidiaries.

Related: The ultimate guide to credit scores

For instance, Tangerine is owned by Scotiabank and may therefore not allow the transfer of a debt owed to its parent company. Check with the bank before applying if you’re concerned that you might not qualify for a card or that the debt may be ineligible for transfer.

Impartial reviews

Before making a final decision about a balance transfer card take the time to read an in-depth review of the card to make sure there are no potential snags or fine print details that might surprise you later on.

Best credit card for balance transfer in Canada: Our list

Credit card
Balance transfer intro rate
Post-promotional balance transfer annual interest rate
Annual fee
CIBC Select Visa* Card
0% interest for up to 10 months with a 1% transfer fee†
13.99%(13.99% purchase annual interest rate and 13.99% cash advance annual interest rate)
$29 (Two year annual fee rebate)
Scotiabank Value® Visa* Card
0% introductory interest rate on cash advances, including balance transfers, for the first six months (12.99% after that; annual fee $29).¹ Plus no annual fee in the first year.¹ Offer ends Oct. 31, 2024.
12.99%
$29
BMO CashBack® Mastercard®*
0.99% introductory interest rate on balance transfers for nine months, 2% fee applies*
22.99%
$0
MBNA True Line® Mastercard®
0% for 12 months
12.99%
$0
Tangerine Money-Back Credit Card
1.95% for six months (1% transfer fee applies)*
19.95%
$0

Conditions Apply. Visit here for the Scotiabank Value® Visa* Card to learn more. *See Card Provider's website and Card Application for complete card details, terms and current offers. Reasonable efforts are made to maintain accuracy of information.

How to complete a balance transfer with a credit card

The process of executing a balance transfer will generally be similar from one card issuer to the next and should more or less follow the sequence below:

  1. 1.

    Apply for a balance transfer credit card using one of the links listed earlier in this article.

  2. 2.

    When filling out your card application you will indicate which creditors you want to pay, how much you want to pay to them, and the account numbers for the debts you'd like transferred

  3. 3.

    Once you've approved for the balance transfer credit card, the credit card company will contact your creditors on your behalf and pay them the amount you indicated. It can take from two to four weeks for this process to be completed.

  4. 4.

    Continue to make any required minimum payments on your debts during the transition process to avoid late fees.

  5. 5.

    Make all balance transfers within the card's allotted window for the promotion. This window varies from one card to the next, but it's typically within three months of opening the account. The amount eligible for transfer also varies from one card to the next. For some cards the maximum transfer amount will match the card's credit limit; for other cards the maximum transfer amount might be 50% of the card's credit limit. If you have multiple sources of debt and their combined total exceeds the amount you're allowed to transfer onto the new card then prioritize transferring the debts that have the highest interest rate.

  6. 6.

    Be meticulous about making at least the minimum payment each month for the new card well in advance of its due date. Missing a payment during the promotional period can result in the bank increasing your promotional interest rate dramatically — potentially to 20% or more. Consider automating your minimum payments, so you'll never, ever be late.

  7. 7.

    Create a personal budget that will allow you to not only make the minimum payment on your new credit card but to also capitalize on the low interest balance transfer period and pay as much of your transferred balance off as possible before the interest rates go back up.

Beware new purchases. Balance transfer credit cards only give you a low interest rate on your transferred balances, whereas new purchases made with the card will likely be subject to a much higher rate. If you intend to make new purchases with your credit card in addition to carrying a balance then either make sure the card you select also has a relatively low purchase interest rate or close the card once the balance is paid off and open a different low interest rate credit card. See our list of the best low interest credit cards for some options.

Will a balance transfer hurt my credit score?

Yes and no. Most credit card applications, including applications for balance transfer cards, will result in a hard credit check. Hard credit checks can bump your credit score down a bit, so it’s not recommended to apply for a lot of different credit cards in a short period of time.

That said, getting a balance transfer card can also boost your credit score, because it increases your available credit and improves your credit utilization ratio. And steady repayment of a transferred balance will reflect well on your credit report over time.

Related: Does checking your credit score hurt your credit?

Balance transfer vs. personal loans

Not everyone is eligible for a balance transfer credit card. Banks and other financial institutions offer personal loans to those looking to consolidate and pay down their debt from almost any source. They front you the money so you can pay off your creditors. You can then focus on paying down the personal loan over several years at a stable fixed or variable rate. Other lenders offer extremely high, predatory rates to those who have a hard time accessing credit, so read the fine print.

Related: Best personal loans in Canada

The decision to take out a balance transfer versus a personal loan depends mostly on what you qualify for, what interest rate you can get, and how much debt you need to consolidate. Read our full article on balance transfers vs. personal loans to determine which is right for you.

Balance transfer credit card
Debt Consolidation Loan
Fees
Balance transfer fee of 0%–3%
Origination fee of 0%–5%
Credit limit or loan amount
$300–$15,000+
$500–$50,000
Interest rate
As low as 0% for 6–10 months; then a post-promotional interest rate of 12–22%
5.9%–16%+ for up to five years

What to avoid when doing a balance transfer with a credit card

Proportional payment allocation

When you make a credit card payment, your credit card issuer has a choice of how it can allocate your payment among the various balances on your card. For example, on one card you may have a balance of 0% from a balance transfer, 19.9% from a purchase and 24% from a cash advance.

Your credit card issuer can then choose to allocate your payment to your highest interest rate balance (the 24% cash advance), to your lowest interest rate balance (0%), or proportionately based on the size of each rate’s balance. Each methodology has different cost implications for you, the cardholder.

If it pays off the 0% interest balance, you'll owe less on principle, but still accrue a lot of interest on your 24% cash advance.

In general, in Canada, if your credit card account consists of balances with different interest rates, such as purchases at the standard interest rate and cash advances at an introductory or promotional interest rate (e.g., a special lower rate balance transfer or a temporary lower rate on all cash advances), any payment that exceeds the minimum payment due will be allocated to those balances in a proportionate manner.

Your payment will not be applied to the balance of your choice, such as the balance with the highest interest rate. For example, if your balance from purchases at the standard rate is $700 and you have a balance from a cash advance of $300 at a 0% promotional interest rate, proportionate allocation means that 70% of your payment will be allocated to your purchase balance and 30% will be allocated to your cash advance balance.

Of course, you would rather 100% of your payment be applied against the balance with the higher interest rate, so that the balance declines faster, paying less interest, costing you less.

With proportional allocation, the only way for you to get rid of your high interest balance is to pay down your low interest balance completely. However, if your low interest balance is high, which most promotional rate balance transfers typically are, your high interest balance will be “conserved” as the banks call it, until your low interest balance is paid off.

The more low interest balance you put on the card, the longer the high interest balance lasts. It’s counter intuitive, but that’s how it works. The good news is, it’s really easy to avoid.

How do you pay down your highest-interest balance first with a credit card?

The answer is actually pretty simple: Use one card for balance transfers only, and another low interest credit card for purchases only. (See our list of the best low interest credit cards for some card options.) You then determine how much of one balance you want to pay down versus the other, allocating the payments to each card yourself.

When is it the right move to apply for a balance transfer credit card?

The main reason to consider a balance transfer option is when you’re carrying debt on one or more credit cards with a higher interest rate and you want to pay it off. As long as you’re moving your balance owing from one credit card to another one with a lower interest rate, you’re making a smart choice and could save hundreds, if not thousands, of dollars (depending on the amount of debt you’re carrying). Though I will add one caveat: a transfer is only a wise choice so long as you pay off or significantly pay down your transferred balance during the promotional period.

When should you stay away?

A balance transfer only works if you’re going to be diligent about paying off the outstanding credit card debt. Therefore, a balance transfer is not right for you if you have no strategy to increase your payments or combat reckless spending habits to ensure your debt doesn’t just keep piling up.

Read: How to pay off credit cards quickly and cheaply

Furthermore, you should stay away from a balance transfer if the breathing room it affords you to pay down your debt will actually encourage you to spend more. For some consumers, a low interest rate can unfortunately encourage them to charge more to their credit cards because their debt feels more manageable.

Things to consider with balance transfer credit cards

Your credit rating

While a balance transfer is almost always a good idea for consumers with credit card debt, there are some additional points to consider before you make a move. To be eligible for a balance transfer you’ll have to apply for a new credit card with a balance transfer promotion. Many credit cards in Canada require a specific minimum credit score, so be sure to check what score is needed before you apply. (Read our ultimate guide to credit scores to learn how to find and read your score.)

If your score is not high enough, you may want to check out whether there are any low interest credit cards you may be eligible for.

Read: Best low interest credit cards in Canada

The balance transfer fee

Another consideration is the transfer fee. Most credit cards charge a balance transfer fee of up to 3.99% of the amount you want to transfer. It’s important to be aware of this fee (which will be added to your overall amount owing) and ensure you are serious about paying off your transferred amount before you incur more debt.

If you have a good credit score and thus have the luxury of being picky, you may want to compare balance offers between cards to see if there is an option that doesn’t charge a transfer fee.

The promotional period

Promo periods vary and generally speaking, the longer the better. Credit card companies usually won’t let you extend the period, so make sure you can pay down the debt in the prescribed time.

The post-promotional period

Your new low interest rate only applies to the debt you transfer. New purchases will be subject to your new card’s usual interest rates, which likely hover around the 20% mark. Any debt you don’t pay off will also be charged interest at the regular interest rate.

3 examples of a balance transfers

Still unsure whether a credit card balance transfer is right for you? A real-life example can help put the benefits of a balance transfer in perspective.

Say you had a credit card with an annual interest rate of 13.99% and you were carrying a balance of $10,000 for a year (and to make things easier, this model assumes you are making minimum payments that keep the overall balance owing consistent at $10,000). After 12 months you would have paid $1,399 in interest. If you got a credit card with a balance transfer option of 0% for 12 months and a 3% fee, you would pay $300 in transfer fees but nothing in interest for the first year.

As long as you paid down the entire $10,000 during the 12-month promotion period, you would be well ahead. If, however that balance transfer card’s normal interest rate was 20% and you didn’t pay off the transferred debt, and in fact, accumulated more such that your balance was back up to $10,000, you’d be paying $2000 in interest in year two. Overall, you’d eventually pay more than you would have if you had just kept your debt on the original credit card.

Scenario 1: If you just kept your current credit card

-
Balance
Interest rate
Interest paid
Balance transfer fee
Year one
$10,000
13.99%
$1,399
$0
Year two
$10,000
13.99%
$1,399
$0
Year three
$10,000
13.99%
$1,399
$0
Total
$10,000
-
$4,197
$0

Grand Total: $4197

Scenario 2: If you did a balance transfer but did not pay off your transferred balance

-
Balance
Interest rate
Interest paid
Balance transfer fee
Year one
$10,000
0%
$0
$300
Year two
$10,000
20%
$2,000
-
Year three
$10,000
20%
$2,000
-
Total
-
-
$4,000
$400

Grand Total: $4300

Scenario 3: If you did a balance transfer and paid off your transferred balance

Balance
Interest rate
Interest paid
Balance transfer fee
Year one
$10,000
0%
$0
$300
Year two
$0
20%
$0
-
Year three
$0
20%
$0
-
Total
-
-
-
$300

Grand Total: $300

This example is a good way of illustrating just how important it is to pay down your debt during the promotional period. Your total costs in Scenario 3 (aside from paying off your balance) would only be $300, which would save you thousands of dollars in interest. However, if you don’t pay off the balance, you may be better off keeping your old credit card if the interest rate is lower than your new card (as illustrated in Scenario 1).

Final word on balance transfers

A balance transfer is a tool that will only work to your advantage if you use it properly and focus as much effort as possible on paying down your transferred debt. Even if you don’t have debt, some people also consider letting others, like close friends or family members, balance transfer onto their credit card. While this can work, it might also leave you with debt you didn’t sign up for, so consider the points we mentioned above before you proceed.

All in all, transferring a balance can help consolidate credit card debt and leave you with breathing room when paying it all back, but it can be suffocating if not handled correctly.

With files from Sandra MacGregor

  • How we chose Canada's best credit cards for balance transfers

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    Money.ca rates balance transfer credit cards on a scale of 1 to 5 (with 5 being the best) and are based on the following criteria (if applicable): annual percentage rate (APR), annual fee, balance transfer fee, foreign transaction fee, penalty fee and APR, rewards programs, sign-up bonuses, customer service, security, additional features, acceptance, and credit score requirements.

    Different categories of cards are rated using different weightings and each card is rated according to its primary category. Money.ca’s business relationships have no effect on ratings.

    For more, read Money.ca’s complete review methodology.

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Bridget Casey is the award-winning entrepreneur behind Money After Graduation, a Canadian financial literacy website aimed at 20 and 30-somethings. She holds a BSc. from the University of Alberta, and an MBA in Finance from the University of Calgary. She has been featured as a millennial financial expert by Yahoo! Finance, TIME Magazine, Business Insider, CBC and BNN. Bridget was recognized as one of Alberta's Top Young Innovators in 2016.

Danielle Kubes is a Millennial personal finance expert and freelance finance writer from Toronto, Canada. Her reporting has been published in The Globe and Mail, Financial Post, MoneySense, Vice and many more. Danielle consults and writes for Money.ca on topics including investing and freelancing.

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