Only 8% of Canadians used a balance transfer offer last year — here's what the other 92% are missing

But before you apply for a balance transfer card, there are a few personal finance rules to follow — because breaking one can eliminate the benefits of this tool, and cost you more in the long run.

How the 0% offer actually works

A balance transfer moves the amount you owe on one credit card to a new card.

For example, by transferring another card's balance to the MBNA True Line card, you'd pay no interest for 12 statement periods, which amounts to roughly 12 months from the transaction date. After that, the balance transfer rate reverts to 17.99%. For Canadians who carry a $5,000 balance on a card that charges 22%, that's an annual savings of $1,100 (not including the one-time fee to transfer the balance to the new card).

Don't let high interest rates hold you back. Explore our top-rated balance transfer cards and start paying down your debt with 0% introductory offers.

How the 0% balance transfer card strategy can fail

Unfortunately, most cardholders don't realize that once a balance transfer is complete, any missed or late payment on that card can immediately cancel this promotional 0% rate.

For instance, the fine print on MBNA cards states that the standard rate kicks in on the first day of the second statement period following any late minimum payment.

For cardholders managing a large balance, that risk is worth taking seriously. An easy way to avoid triggering a cancelled promotional rate is to set up automatic payments at least for the minimum amount for that card, to ensure the offer stays intact.

You should also avoid using the balance transfer card for any new purchases. That's because most balance transfer promotions do not apply to new purchases made on a card. These new purchases accrue interest immediately at the card's standard purchase rate, from the date of purchase.

To avoid these extra high-interest charges, always use a different card for everyday spending during the promotional period of your balance transfer card.

3 things that will cancel your promotional rate immediately

Most people who lose the 0% rate do so through avoidable mistakes. Here are three common mistakes to avoid:

• Missing a minimum payment. The promotional rate ends in the second statement period after a late minimum payment. Automatic payment for the minimum amount removes this risk.
• Waiting too long to transfer. The balance transfer must be initiated within 90 days of account opening. Applying and waiting will cost you the offer.
• Assuming new purchases are covered. They are not. New spending accrues interest at the standard purchase rate from day one. Treat this card as a debt-repayment tool only during the promotional window.

Do the math: How to tell if a transfer fee is worth it

Virtually all balance transfer cards will charge a fee. Typically, that fee is a percentage applied to the amount being transferred. For example, if you transferred $5,000, and the fee was 3%, then the fee paid is 3% of $5,000, or $150.

That’s the only cost you pay — provided you follow the rules and clear the balance within the promotional period (usually three to 12 months).

So is it worth it to transfer a card balance to a card with a promotional rate? To find out, you need to do the math.

Let's assume a cardholder carries a $4,500 balance on a card charging 19.99%. Left on that card for 12 months, the interest alone totals roughly $900. By transferring the balance, the cardholder would pay a 3% transfer fee, or $135. In the first year of 0%, that's a savings of $775. In this example, the transfer fee pays for itself within the first two months of avoided interest charges.

That means that any Canadian carrying a balance on a credit card needs to spend a few minutes doing this, which is a straightforward calculation. And if your savings are significant, it's time to use a tool that can help you get out of debt faster.