Balance transfer cards are often used to move high interest balances to a card with a low interest rate. This helps save on interest and pay down existing balances over a shorter period of time. Also known as debt consolidation, borrowers with multiple high interest cards often transfer their balances elsewhere to benefit from a zero or low interest introductory rate.
I Get a Lot of Balance Transfer Promotions in the Mail. What Happens after the Introductory Period Expires?
Many issuers advertise balance transfer cards by mail as a way to attract new clients and increase their customer base. When the introductory period expires, the standard rate applies to all purchases charged on the card. The standard rate varies from issuer to issuer and can be as high as 30 percent. Usually financial institutions offer rates ranging from 11.99 to 21.99 percent, based on your credit profile. Applicants with a history of missing or late payments are usually offered high standard rates.
Is Balance Transfer for Me?
This depends on many factors, including interest charges on all cards held, penalty interest, credit limit, grace period, income level, and more. Look at different offers, rates, transfer fees, and criteria for approval. Some financial institutions only accept applications from clients with stellar credit while others have more lenient requirements. In addition to your credit profile, consider how many balances you have, whether late or missing payments are an issue, and if a low interest card with an intro period will help you pay down your card debt. This depends on the length of the introductory period and the amounts owned. As a rule, a balance transfer is a good choice if you find it difficult to keep track of due dates and monthly payments and miss payments as a result. This can be a problem, especially if you have a fair or poor credit score. Your score is likely to suffer.
Transferring existing balances also makes sense if you hold multiple cards and pay the minimum only. In this case you pay a lot in interest charges which makes card debt expensive. Whether this is a good option also depends on the types of cards held. Department store cards, for example, charge higher interest rates. Finally, you may want to consider your financial situation and short- and long-term goals and whether alternative solutions make more sense. Depending on the types of debt held, there are alternatives such as credit counseling, negotiation with creditors, and individual voluntary arrangement. Other alternatives include debt restructuring, bankruptcy (as a last resort), and formal proposal. A balance transfer is a good choice if you mostly have credit card debt (i.e. revolving credit). In any case, ask for charges such as transaction fees, the nominal rate, the teaser rate, and others. Most banks offer a teaser rate over a period of 6 to 15 months.
How to Find a Low Interest Balance Transfer Credit Card
Check with different issuers, including online banks and brick-and-mortar banks, caisses populaires, unions, and credit card companies. If you are a union member, this may be a good starting point. Credit unions usually offer cards with affordable rates and are more willing to work with borrowers with average or compromised credit. Many issuers offer cards by Discover, MasterCard, American Express, and Visa. Some financial establishments also offer cards with low intro rates and perks such as cash back, a long introductory period of 18 months, no annual fee or annual fee waivers, and many others. Ask whether they can offer a potential savings estimate provided that you make on-time payments. Some issuers also offer one-time bonuses, and holders enjoy additional savings. To find a low interest card, also check with major banks such as MBNA, Scotia Bank, CIBC, and others. You may also ask your family, colleagues, and friends about their credit card experience.
Top 3 Balance Transfer Credit Cards
MBNA, President’s Choice Financial, and Scotiabank offer cards with premium benefits and optional extras. Some cards offer perks such as extra bonus points, discounts, and competitive standard rates.
Scotiabank offers a Visa card with a low intro rate of 3.99 percent. The best part is that the bank charges no balance transfer fees. The low rate applies during the introductory period (6 months). The card features perks and benefits such as car rental discounts, optional card protection, telephone banking, and more. The fact that there is no annual fee means that borrowers benefit from additional savings. Applicants are free to order supplementary cards.
This is another good balance transfer option for borrowers who use high interest cards. MBNA offers a longer introductory period of 12 months and zero introductory interest on balance transfers. While this card features no rewards, customers are offered the opportunity to save on interest charges over a longer period. MBNA also features optional coverage in case of accidental death, critical illness, disability, and involuntary unemployment. Canadian residents who are of legal age and have a Canadian credit profile meet the eligibility requirements.
• Annual fee: none
• Grace period: at least 21 days
• Interest rate: 19.99 percent
President’s Choice Financial features a balance transfer card that offers the opportunity to earn bonus points for travel services and at participating stores. The card offers standard benefits such as purchase assurance and extended warranty and optional extras and perks such as account balance protection in case of involuntary job loss and disability. One of the main benefits for customers is the low balance transfer rate of just 0.97 percent over a period of 6 months. Customers also benefit from flexible and convenient online banking that allows them to view e-statements and their account summary, check available credit and existing balance, and more.
• Annual fee: none
• Interest rate: 19.97 percent
• Penalty interest rate: 24.97 percent
• Grace period: at least 21 days