Best Balance Transfer Credit Cards in Canada for September 2023
What You Should Know
- Balance transfer cards allow you to switch to a temporarily low interest rate of 0% to 2.99%
- The promotional rate is typically for 6 to 12 months.
- Missing a payment may terminate your promotional interest rate.
- There is an upfront balance transfer fee of 1% to 3%
- Different cards will have different promotional rates, lengths, and fees.
Effective APR of Top Balance Transfer Cards
Not Including Balance Transfer and Annual Fees
Balance transfer cards reduce your monthly credit payment and allow you to pay off debt faster. They do this by allowing you to swap high-interest debt for low interest rates. For example, the average credit card has an APR of around 20.99%, while balance transfer cards typically have promotional rates ranging from 0% to 2.99%.
However, most balance transfer cards only have six to twelve months of a low-interest promotional period. If you haven't fully paid off your balance by the end of the period, your interest rate and monthly payments will increase again. As a result, balance transfer cards should be treated as a second chance to get out of a debt spiral. If you want to rebuild financial stability, continue reading to become an expert in balance transfer cards.
Balance Transfer Credit Cards Explained
A balance transfer is when you move your debt from one credit card to another. For example, if you have a balance of $5,000 on a credit card with an APR of 20.99%, you could transfer that balance to a balance transfer credit card with a 0% intro APR for 12 months. After the 12 month intro period ends, the APR will increase to the standard rate, usually between 12.99% and 22.99%. As a result, you'll temporarily save on interest and have more money to pay down your balance.
There are a few things to keep in mind when doing a balance transfer:
- Most balance transfer credit cards have a balance transfer fee of 1% - 3%. If you're transferring a balance of $5,000, you'll have to pay a balance transfer fee of $50 - $150.
- Balance transfers can only be done from credit cards at other financial institutions.
- You can't transfer a balance from one balance transfer credit card to another.
- Some cards limit the percentage you can use for balance transfers, while other cards let you use the total amount.
- Most cards will end your promotional rate if you miss a minimum payment.minimum payment.
How a balance transfer affects your credit score
In the long term, a balance transfer will improve your credit score. However, each new card you apply for will temporarily decrease your score. This is because credit issuers will perform a hard credit check when approving you for any credit card in Canada. However, your score will increase in the long term if you make all your payments on time and keep your credit utilization low.
CIBC Balance Transfer Card
CIBC Select Visa Card
- Common carrier accident insurance
MBNA Balance Transfer Card
MBNA True Line Mastercard
BMO Balance Transfer Card
BMO Preferred Rate Mastercard
- Purchase protection and extended warranty
BMO AIR MILES Mastercard
- 1 Air Mile for every $25 spent.
- 800 Air Miles Bonus Miles when you spend $1,000 in the first 3 months.
BMO Rewards Mastercard
- 1 BMO Point for every $1 spent
- 10,000 points when you spend $1,000 in the first 3 months
BMO CashBack Mastercard
- 3% on groceries
- 1% on recurring payments
- 0.5% on anything else
- 5% cash back in first three months
Scotiabank Balance Transfer Card
Scotiabank Value Visa Card
Scotiabank Momentum Visa Card
- 2% cashback on groceries, gasoline and recurring payments
- 1% cashback on anything else
- Purchase security & extended warranty insurance
Scotiabank Momentum No-Fee Visa Card
- 1% on groceries, gasoline and recurring payments
- 0.5% on anything else
- 5% cash back on all purchases for the first 3 months (up to $2,000 in spending)
TD Balance Transfer Card
TD Emerald Flex Rate Visa Card
Tangerine Balance Transfer Card
Tangerine Money-Back Mastercard
- Select two categories to earn 2% cashback on
- 0.5% cashback on anything else
- Purchase security & extended warranty insurance
- 10% cash back on all purchases for the first 2 months (up to $2,000 in spending)
Cost Savings from Balance Transfer Cards
Saving from high to low-interest rates can save you hundreds of dollars. The table below shows how much you could save by transferring your balance to a balance transfer credit card. The following scenario assumes you have a beginning balance of $6,000 on a travel credit card with an APR of 22.99%. You will be making monthly payments of $600. It compares the total interest and fees paid if you were to keep it on that card, or switch to a balance transfer card.
| Travel Card | Balance Transfer Card | |
|---|---|---|
| Beginning Balance | $6,000 | $6,000 |
| APR | 22.99% | 0% (for 10 months) |
| Monthly Payment | $600 | $600 |
| Time to Pay off Balance | 12 Months | 10 Months |
| Balance Transfer Fee (1%) | N/A | $60 |
| Interest Paid | $792.75 | $0 |
| Total Interest & Fees Paid | $792.75 | $60 |
As you can see, balance transfer cards can be highly beneficial, especially if you have a large balance to pay off. However, it's important to remember that balance transfer cards should only be used as a last resort. If you're struggling to make payments on your balance transfer card, the issuer may close your account, and you'll be responsible for the balance.
What is APR?
The Annual Percentage Rate (APR) represents the actual cost of borrowing. It includes additional fees such as legal, administrative fees, and more. It's a better measure than the interest rate, which only demonstrates the direct cost of the loan and not related costs. As a result, a loan may be advertised with a low interest rate but secretly have a high APR. Lenders are required by law to disclose the loan’s APR, but you can also calculate the APR yourself.
A balance transfer is only worth it if you can pay off your balance before the intro period ends. If you can't, you'll be charged an increased interest rate at the end of your promotional period. The best time to do a balance transfer is when you have a balance on a high-interest credit card and can't pay it off within six months. Above, we have included a table of the best balance transfer cards in Canada to help you find a match.
Additional Considerations
While comparing balance transfer cards on their promotional interest rate is great, understanding their additional benefits may help you choose the best card. This includes annual fees, welcome bonuses, and more. This part will provide you with additional information to make informed decisions.
Annual Fee
The annual fee is the yearly cost to keep your balance transfer credit card. Some cards charge an annual fee, while others do not. In general, the best balance transfer cards have an annual fee ranging from $0 to $29. However, in many cases the first year fee is waived.
Balance Transfer Fee
As we mentioned earlier, balance transfer fees are usually 1% - 3% of the balance being transferred. If you're moving a balance of $5,000, you'll have to pay a balance transfer fee of $50 - $150. The fee varies by financial institutions and are listed below.
| Financial Institution | Balance Transfer Fee |
|---|---|
| CIBC | 1% of total balance transferred |
| MBNA | 3% of total balance transferred, $7.50 minimum |
| BMO | 1% of total balance transferred |
| RBC | Up to 3% of total balance transferred |
| Scotiabank | 2% of total balance transferred |
| TD | 3% of total balance transferred, $5 minimum |
| Tangerine | 3% of total balance transferred, $5 minimum |
Length of Promotional Period
The intro balance transfer rate is the promotional interest rate you'll receive when you open your balance transfer credit card. This rate is usually 0% for 6 months, 9 months, or 12 months. After the intro balance transfer period ends, a higher interest rate will apply to any remaining balance.
Transfer Limit
Balance transfer credit cards sometimes have a limit on how much you can transfer. This limit is usually calculated as a percentage of the card's assigned credit limit. For example, if you have a balance of $5,000 and a limit of 50%, you'll only be able to transfer $2,500 minus the balance transfer fee.
Welcome Bonus
A welcome bonus is a perk that some balance transfer credit cards offer to new cardholders. The welcome bonus usually includes points, cash back, or travel rewards. For example, the BMO Rewards Mastercard provides a welcome bonus of 10,000 BMO points when you spend $1,000 in the first three months. Although be cautious of your spending if you are attempting to pay off your debt.
Cashback
Some balance transfer cards offer cashback or rewards points. However, these balance transfer cards typically have a higher APR than cards that don't offer rewards. If you are looking for a card with rewards, you should consider the other best credit cards that maximize the rewards for you.
How to Complete a Balance Transfer
- Compare balance transfer credit cards to find the best one for you.
- Review each balance transfer card's terms and conditions to ensure it's a good fit.
- Fill out the balance transfer application and provide all the required information.
- Provide your balance, interest rate, and other balance transfer details.
- Wait for your balance transfer to be processed and the funds to be deposited into your account.
- Make payments on time and in full to avoid being charged interest on your balance.
- Once the balance is paid off, you can close your account or keep it open for future balance transfers.
- If you keep the account open, pay off your balance monthly to avoid interest charges.
Balance Transfer Alternatives
As mentioned previously, balance transfer cards are a debt consolidation product. If you have home equity, you may be able to qualify for lower interest rates and save more in the long term. This is because balance transfer interest rates will shoot up to around 19.99% when the promotional period ends.
If you require more time to pay off your debt, the following products could be right for you. Additionally, you can begin with a balance transfer card and switch to the following products once the promotional rate ends.
| Lending Product | APR* |
|---|---|
| Balance Transfer | 0% to 4.99% (for 6-12 months) |
| HELOC | ~5.60% |
| Mortgage Refinance | ~6.99% |
| Second Mortgage | ~7.50% |
| Personal Loan | ~8.70% |
*Using rates from Dec 21, 2022.
HELOC
A home equity line of credit (HELOC) allows you to borrow money from your home. You can borrow up to a specific limit, and you only have to pay interest on the money you borrow. This differs from a refinance or second mortgage, which offers a lump sum of money. Additionally, HELOCs tend to have interest rates comparable to balance transfers.
Mortgage Refinance
A mortgage refinance allows you to withdraw money from your home equity at the market mortgage rate. You can withdraw a maximum of 80% of your home's value. For example, imagine your home is worth $1,000,000 with a mortgage balance of $600,000. Considering you can borrow up to 80%, or $800,000, this would allow you to withdraw up to $200,000 from your home equity.
By withdrawing this amount, your monthly mortgage payment will either increase, or you can keep the payments similar by extending the amount of time it takes to repay your mortgage. Note that to avoid mortgage-breaking penalties, it's best to refinance at the end of your mortgage term. Most Canadians have a five-year term.
Second Mortgage
A second mortgage provides more flexibility than a mortgage refinance in exchange for a slightly higher interest rate. This is because you won't need to wait for your mortgage term to end to refinance. You can receive a second mortgage at any time without penalties. However, you are still limited to borrowing up to 80% of your home's value.
Personal Loan
Personal loans don't require you to have a home. The interest rates on personal loans will be higher than those mentioned. However, you may need to offer collateral, such as a car, to get the lowest rates.
The Bottom Line
A balance transfer credit card can save you significant interest if you qualify for a promotional balance transfer rate. However, these promotional rates typically last for 6 to 2 months. Additionally, balance transfer cards have fees that you should be aware of.
When deciding if a balance transfer is a suitable option, consider how much debt you have and if you think you can repay it within the promotional period. Balance transfer credit cards typically have a 1% to 3% balance transfer fee.
Additionally, you should compare balance transfer offers and decide which card is best for your needs. Some balance transfer cards offer rewards, such as cashback or points, while others have a low or no balance transfer fee.