How to Transfer a Credit Card Balance

Most of us don’t plan on racking up a mountain of debt when we sign up for a credit card, but it can happen. This type of debt can quickly increase to the point where it feels out of control because credit card interest rates are so high.

If you find yourself overwhelmed and struggling to keep up with your credit card payments, it might be time to consider transferring your credit card balance.

What is a credit card balance transfer?

A credit card balance transfer is what it sounds like: you move the balance you owe on one credit card to a new credit card with a better interest rate.

The main reason why you would want to transfer your credit card balance is if you are struggling with credit card debt and can’t pay it off quickly. Many Canadian credit cards have interest rates of around 20%, which means that a balance you carry over from month to month will grow quickly.

Balance transfers can be a valuable option for people struggling with high-interest credit card debt, but it’s important to be aware of several rules and best practices.

Best Credit Cards in Canada

Compare all different credit cards side-by-side and find out the best card that will meet your need with special perks and benefits

Explore Now

What is a balance transfer credit card?

A balance transfer credit card is a credit card that charges a low rate of interest, making it ideal for transferring a credit card balance. The best balance transfer credit cards have low fees and do not charge an annual fee.

Credit cards designed for balance transfers typically have much lower interest rates, and some even have promotional periods during which they offer an introductory rate of 0%. Once the promotional period ends, the rate jumps up.

If you can transfer your credit card debt from a card with 20% interest to a card with 0% interest and pay it off within the promotional period, you can end up saving a lot of money. But if you’re not sure whether you can, make sure to choose a low-interest credit card that won’t change its rate.

In addition to interest, these credit cards also charge balance transfer fees, which will be listed in the paperwork. This fee will be added to the amount you transfer over, increasing your debt.

For example, say you have a card with a 2% balance transfer fee. If you transfer a balance of $1,000 to this card, you’ll be charged $20, so you’ll wind up with a new credit card balance of $1,020.

» MORE: How to calculate credit card interest

How to transfer your credit card balance

Step 1: Apply for a balance transfer card

The first step is to shop around for a balance transfer credit card that suits your needs. Do your research to see which card offers the best introductory and regular interest rates, both during the promotional period and afterwards.

You should also make sure you meet the qualifications for the card and that it accepts balance transfers. For example, you may need to apply for a card from a different issuer to qualify to transfer a balance.

Finally, apply for the card and wait until you’re approved.

Step 2: Transfer the balance

Once you’ve received your new credit card, it’s time to move the balance.

You can usually do this by contacting the credit card provider online or by phone and asking them to initiate the balance transfer. You’ll need to provide your credit card info, including the balance amount.

When the transfer is complete, all of your debt from the original credit card will now be on this credit card, which means it’s the one you’ll need to work on paying off.

Step 3: Pay off your credit card balance

Finally, it’s time to develop a plan to pay off the balance and eventually eliminate that credit card debt.

Let’s say you transferred a $1,000 balance. When you add the 2% balance transfer fee, your total debt is now $1,020. If the balance transfer card you chose offers 0% interest for six months, you should find a way to pay off that $1,020 balance within six months to avoid paying any more interest on your credit card debt. To do that, you’d need to make a $170 payment every month.

If you can, set up automatic payments or pre-authorized debits from your chequing account so you never forget to pay. Work these payments into your budget and avoid spending any money using the credit card — and creating more debt — until you’ve paid off your balance.

Once you transfer your balance to a balance transfer card, it’s wise to use other payment options, such as your debit card or cash, to avoid continuing to add to your debt.

Does it look bad to transfer credit card balances?

Balance transfers take time, involve fees, and require you to apply for a new card, which triggers a hard credit inquiry and a temporary dip in your credit score. However, a credit card balance transfer done strategically can help save you money in interest charges and get you closer to financial independence.

Unfortunately, the best balance transfer credit card offers typically require good or excellent credit. Applicants with subpar credit may have a difficult time getting approved for a card with a high credit limit and low interest rate, making it hard to get the best value from the arrangement.

If the costs of doing a balance transfer can exceed the benefits, consider using a loan to consolidate your credit card debt instead.

Will a balance transfer hurt my credit?

Simply having a balance transfer credit card shouldn’t impact your credit score.

However, there are a couple of ways of using balance transfers that could hurt your credit score.

Not waiting long enough between credit card applications. Applying for a balance transfer card at the same time as you apply for several other credit cards or loans.
Ignoring your credit utilization. Using a balance transfer to empty out your old credit cards, but then filling them back up and increasing your overall amount of debt and credit utilization.
Cancelling your old credit card the wrong way. After transferring your balance, it’s a good idea to keep your older credit card open and available with a zero balance. Closing your old credit card immediately can decrease the length of your credit history.