Balance Transfer Credit Cards

Updated: Sep 10, 2020
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The Balance transfer cards are used for moving outstanding debt from one loan account to another. They can be useful if you're trying to consolidate debt or when you want to save money on high-interest fees - providing that the balance transfer card has lower APR than your current card.

While most such cards appear beneficial at first glance, especially with exciting promotional offers like 0% APR, they have many nuances and won't offer the same value to all cardholders. It's crucial to keep informed and learn everything there's to know about a financial product before you apply for it. So, let's take a closer look at balance transfer cards and see what you might get from them.

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Editor's suggestion: Balance Transfer Credit Cards - Nov 28, 2020

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A balance transfer enables you to move debt from a high-interest credit card to that with a lower interest rate. Many issuers will offer a promotional 0% APR for the first six to 18 months of using your new card.

However, even if the interest rate on a balance transfer card isn’t much better than what you’re already paying, you could still benefit from transferring your outstanding debts to a new card if it comes with better bonuses or rewards.

Keep in mind that when you transfer balance, regardless of the interest rates, welcome bonuses, and rewards, you’ll still be carrying a monthly balance, and you’ll need to cover at least the minimum payments each month before the due date. If you make new purchases with your balance transfer card, you’ll need to cover those debts as well.

You can transfer debt from one credit card to another, but depending on the issuer, you can also transfer from other loan accounts – student and payday loans, car loans, and others.

You should also know that you cannot transfer a balance from one credit card to another from the same issuer. So if you have a balance on a Scotiabank credit card with a high-interest rate, for example, you cannot transfer the debt to a Scotiabank credit card with low interest.

If you have a 0%APR for six to 18 months, it would be in your best interest to pay off your debts in full before the end of this promotional period. Otherwise, you’ll likely encounter APRs of over 29.99%, depending on the issuer.

How Does a Balance Transfer Work?

While it’s called a “balance transfer,” you’re not actually transferring the balance between cards. In reality, you’re using one credit card to pay off debts from another card.

In most instances, you’ll receive a balance transfer check made out to the card issuer you want to pay off. However, the transfer can be completed online or via phone as well. You’ll need to provide the balance transfer card issuer with your account information and amount owed.

If you want to transfer a balance of $1,000 from your Scotiabank credit card to a BMO credit card, for example, you’ll need to provide BMO with your Scotiabank credit card number and account details, and state that you want $1,000 paid to that account.

Once the balance is transferred, you’ll have to make on-time monthly payments to BMO until you pay off the $1,000 plus any additional fees.

When transferring the balance, make sure to check your new credit card limit. Your balance cannot exceed your limit, so issuers will have maximum balance restrictions.

Balance transfers typically take 1-2 business days to complete, but they can sometimes take much longer, going up to several weeks. Make sure to cover at least the minimum payments until the transfer shows up on your account. Otherwise, you risk encountering late payment fees and other penalties.

Balance Transfer Card Fees

The fees you’ll encounter will vary by the issuer. The best balance transfer cards will help you save money by offering three zeroes:

  • 0% introductory APR
  • 0% balance transfer fee, and
  • $0 annual fees

If this isn’t possible, look for a card with at least a 0% introductory APR and no annual fees. Without these benefits, charges can quickly add up and make your new credit card more expensive than it needs to be. It’s better to pay a small one-time balance transfer fee than encounter high-interest rates and annual fees.

Balance transfer fees will typically be between 3% and 5%. If the issuer doesn’t have a cap on the fee amount, you could benefit from transferring large debts.

With balance transfer fees, you’ll encounter all the typical credit card fees; cash advance fee, ATM withdrawal fee, new purchase APR, late payment fees, and more.

It’s crucial to avoid late payment fees even if they’re affordable. Being late on your payment could cancel benefits such as 0% APR, rendering any balance transfers useless if your goal was to save money.

Things to Keep in Mind When Transfering Balance

While many issues will market their 0% balance transfers, 0% APR, and $0 annual fee, it’s not a guarantee that you’ll get these benefits. If you have a poor credit score, you might not be eligible for these bonuses. So, always read the fine print and see whether you meet the requirements for these promotional offers.

RELATED: Offers for bad credit holders

Also, keep in mind that the balance transfer could impact your credit score. Primarily, the credit card issuer will make a hard inquiry into your credit report to see whether you qualify for the balance transfer, and this will temporarily lower your score.

Secondly, you could harm your score if your balance is too high compared to your new credit limit. Let’s say that you’re transferring a balance of $3,000 to a credit card with a limit of $5,000. Your credit utilization ratio will jump to 60%. As a general rule of thumb, you’ll want to have a credit utilization ratio of less than 30%. Otherwise, your credit score will be reduced.

Another thing of note is that your account history’s length also has an impact on your credit score. If you close an old account and open a new one, your score can drop by a significant amount.

The Bottom Line

Balance transfer cards can be useful for consolidating debts and saving money, but you need to be responsible when using them. Read the fine print to ensure that the terms and conditions are favorable, and calculate how much you’ll be saving if you transfer.

Always compare and contrast balance transfer cards from different issuers to find the one best suited for your needs, and take into consideration how the transfer will impact your credit score.

Balance Transfer Card Offers Recap

Balance Transfer FAQs. What People Ask About Balance Transfers

Can I transfer balances between cards from the same bank?2020-08-31T22:44:30-07:00

In most instances, you will not be allowed to transfer your balance between cards offered by the same credit card issuer. You will need to find another bank or issuer that will take on your debts.

The reason for this is simple – banks benefit from charging interest and fees. If you’re already paying a high annual fee and high interest on your outstanding balance, the bank will lose money if they offer you to transfer your balance to another of their accounts.

Even if your bank is currently offering balance transfers with much more favorable terms, conditions, rates, and fees, you likely won’t be eligible for them. These offers are to attract new clients.

RELATED: No annual fee offers

What kinds of debts can I transfer to a balance transfer card?2020-08-31T22:43:57-07:00

While the vast majority of cardholders opt for balance transfer cards to transfer debt from one card to another, this isn’t your only choice. You could transfer other types of debt as well.

Some issuers will allow you to transfer car loans, furniture loans, student loans, personal loans, and more monthly installment payments to your new credit card.

However, this will vary from issuer to issuer. It’s always in your best interest to check with a specific bank to see what kinds of loans you can transfer to their balance transfer card.

How long does it take to transfer a balance?2020-08-31T22:44:01-07:00

As a general rule of thumb, a balance transfer takes one to two business days to complete. However, depending on the issuer and the individual cardholder, the process can take several weeks.

While you’re waiting for the transfer to complete, it’s of utmost importance to continue making minimum monthly payments. Otherwise, you’ll be hit with high late payment fees that will only increase your debts.

Continue making payments until your account indicates that the transfer is complete. If the transfer is taking longer than usual, you can always contact the bank to see what is happening.

Is a balance transfer card worth it?2020-08-31T22:43:48-07:00

Balance transfer cards are often worth it, but this depends on your specific financial situation, current rates, and fees on the credit card, and the terms and conditions of the new card you’re considering.

If the balance transfer card comes with 0% APR, 0% balance transfer fees, and $0 annual fees, it could be well worth it to consider it. You could reduce your debt and save money by paying off your balance by the end of the promotional period.

However, if the card comes with balance transfer fees and interest rates, you’ll need to consider how much you’ll be saving by applying for it, and if you’ll be saving anything at all.

Can I get a balance transfer card with a poor credit score?2020-08-31T22:43:42-07:00

If you have a poor credit score, you likely won’t be eligible for a favorable balance transfer card. Your credit score and previous credit history will determine whether you’re eligible for promotions such as 0% APR. If you’re not, then the balance transfer likely won’t be in your best interest.

Besides, if you already have a poor credit score, applying for a balance transfer credit card could lower it even further. Opening new accounts, closing old ones, increasing your credit utilization ratio, and more will reduce your credit score, so you need to be careful.

What is a three zeroes card offer?2020-09-02T09:56:03-07:00

The 3 Zeroes card offer is such cards that have all of below:

Such cards are usually available for Excellent Credit holders only. However, sometimes Good Credit holders can get approved for a 3 zeros card, too.

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