High-interest charges often make it challenging to pay off credit card debt in Canada. Balance transfer credit cards are one of a few solutions available to you.
A balance transfer credit card allows you to combine your existing credit card debt onto one card. Therefore, it’ll be easier to manage what you owe.
Balance transfer credit cards have low promotional interest rates compared with other credit cards. You may come across some balance transfer credit cards offering a rate as low as 0%. This is one significant advantage of balance transfer credit cards. Credit card providers offer these rates for a limited time, such as 180 days or 12 months.
If you're unable to manage your credit card debt, a low-interest rate makes it easier to pay it off. The reason is, your balance will be charged with little to no interest. Paying down your balance will no longer be an unwinnable race against interest charges with a balance transfer credit card.
A balance transfer card allows you to merge existing debt onto one card, ideally at a lower rate. After transferring your debt, you’ll only have to make card bill payments for the new card.
Instead of using this card for everyday purchases, it’s best to focus on paying down the balance. Otherwise, you’ll accumulate more debt and gain the risk of not paying off your debts before the promotional interest rate expires.
Before getting a balance transfer credit card, weigh the advantages and disadvantages.
As enticing as the welcome offer on a balance transfer credit card may be, it’s best not to rush into the decision. Consider these pointers to choose a card that won’t leave you in a pickle down the line.
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Moving your balance to a low-rate card can relieve the pressure if you need a break from high-interest charges. Your payments will reduce the balance rather than only paying off interest.
Yes. Applying for a new credit card requires a hard credit check. While you temporarily lose a few points, you can gain them back as you repay your debt through your balance transfer credit card.
Most credit card providers only allow you to transfer credit card debt. However, some may accommodate your loans and lines of credit.
Bear in mind that you may not be able to transfer debt amongst the same lender’s products. For instance, you can’t transfer a BMO loan to a BMO balance transfer credit card.
Absolutely. You can lessen your debt as long as you pay off your debts before the promotional period expires. You must make a payment plan to ensure you take full advantage of the promotional period.
For instance, if you transfer $2,000 to a card with a promotional period of 6 months, divide $2,000 by six. Plan to pay off at least $333 every month before the interest rate resets. Your estimation should also include any extra fees.