If you’re having trouble paying off your credit card debt, a balance transfer could help you get back on track.
A balance transfer lets you use a credit card to pay debt on another credit card. This could save you money if you’re moving the balance to a card with a much lower interest rate. Card issuers often have balance transfer offers, sometimes with rates as low as 0%.
How balance transfers work
When you transfer a balance to a credit card, the new issuer pays off the debt on your old card. That balance is then moved to the new card, which you’re responsible for making payments on.
How to do a balance transfer
- Apply for a card with a low-interest rate offer on balance transfers. Or use an offer on a card you already have. To qualify, your account has to be in good standing.
- Request a balance transfer. You need to know the amount of debt you're moving, your account information and the name of the card issuer.
- Keep making payments on your old card. You’re still responsible for any charges and interest until the balance transfer is approved. This could take anywhere from a few days to a few weeks.
- Avoid making new purchases while you’re paying off your balance transfer, so you don’t get into more debt.
- Pay off your balance before the offer period ends or pay it off as soon as you can. If you have a remaining balance, you’ll be charged the regular balance transfer interest rate.
How much does a balance transfer cost?
Most issuers charge a balance transfer fee of around 1% to 5% of the amount you transferred. The fee is usually added to your balance. So if the fee is 3% and you transferred $2,000, you’ll be charged $60, bringing your total to $2,060. Sometimes, an issuer will waive the fee or offer a lower fee as part of a promotion.
Benefits of a balance transfer
The purpose of a balance transfer is to help you pay off your debt. This means paying as little interest as possible. For example, if a card has an introductory interest rate of 0%, you have a chance to pay off your balance without accumulating more interest.
Balance transfers can also help you manage your payments. If you have balances on multiple credit cards, consolidating your debt onto one card means fewer payments to keep track of.
Paying your debt off faster can also boost your credit score. Balance transfers can help you reduce your overall debt, which also gives you more available credit on your card. Both outcomes are good for your credit score.
Factors to consider when you’re deciding to make a balance transfer
- Promotions: You want to pay your debt off as quickly as possible. So the lower the interest rate, the better
- Promotional period: Check if the offer is long enough for you to pay off your balance. When the promotion ends, the interest rate goes back up. If you’re still carrying a balance, you’ll have to pay a higher interest rate
- Card issuer: You can’t transfer a balance to a card that’s from the same issuer. For example, if you want to transfer a balance to a CIBC card, it has to come from a non-CIBC card
- Credit limit: The amount you can transfer depends on the card you’re moving your debt to. For some cards, the maximum amount is the card’s credit limit. For other cards, it’s 50% of the credit limit
- Credit score: To qualify for the best balance transfer offers, you usually need good credit
- No interest-free grace period: Unless you’re using a 0% interest rate offer, you’re charged interest as soon as the balance transfer is posted to your account
- New purchases: The promotional balance transfer interest rate only applies to the balance you transferred. That means for new purchases, the higher regular purchase rate applies
Balance transfer promotions
The best balance transfer promotions offer 0% interest. This means for the length of the offer, you’re not paying any interest on the balance you moved.
For example, if a card has a promotional interest rate of 0% for 12 months, you won’t be charged interest on the balance you transferred during that time. This means you can pay off your debt faster than if you were charged the regular interest rate for purchases.
Worried you can’t pay off your balance before the offer period ends? Look for a card with a great balance transfer offer and low standard interest rates. This may be a good option if you carry a balance from month to month or plan on making new purchases while paying off your balance transfer.
Your balance transfer questions answered
