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.

What Is a Balance Transfer Credit Card?

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.

How Balance Transfer Credit Cards Work

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.

Pros and Cons of Balance Transfer Credit Cards

Before getting a balance transfer credit card, weigh the advantages and disadvantages.

The Pros of Balance Transfer Credit Cards

• Easy debt consolidation. If you’d rather not consolidate your debt with a loan, a balance transfer credit card can come in handy. You can transfer multiple debts onto one card, making it easier to track payments and settle what you owe.
• Low-interest rates. The main point of a balance transfer credit card is to lessen the load of interest. Some cards offer a 0% APR for transferring your debt to a new card. This is a great way to save on interest charges for the introductory period.
• Additional benefits as a cardholder. Some balance transfer credit cards have more than a low promotional interest rate. You may get benefits, such as no annual fee and reward points. This means you can have the best of both worlds: low interest and great perks.

The Cons of Balance Transfer Credit Cards

• A strong credit score is often required. Great balance transfer offers often cater to those with good to excellent credit. So, if you’re still improving your credit profile, you may not be eligible for a balance transfer credit card.
• Balance transfer fees. While you will receive a low-interest rate for a limited period, you may incur extra fees and surcharges on transfers. Therefore, avoid cards with fees above 2% and 3%.
• Interest rate hikes. If you miss a payment on your card, your interest rate will rise. This can make paying off your debt much harder.
• Balance transfer limits. Not all balance transfer credit cards allow you to transfer all of your existing debt. You may only be able to transfer $2,000 to your new card because of your credit limit.

Choosing the Right Balance Transfer Credit Card for You

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.

1. Look for a balance transfer interest rate that’s low and manageable for you.
2. Watch out for the promotional time frame and weigh it against the time you need to pay down your debt. A long promotion period is much better than a short one.
3. Consider the interest rate after the promotional period ends. While you start with a low rate, you may face excessively high-interest charges once the promotion is over.
4. Look at the annual fee and balance transfer charges.