To save on interest charges on your credit card balance you have to move that balance from your existing credit card with a high interest rate to a new credit card which offers 6 to 12 month low or no interest charges.
Do your research. Banks come out with new credit card offers almost on a monthly basis- so check to see who has the best offer here.
Once you find a card that fits your needs, apply for the card and get approved, you can begin the balance-transfer process. You’ll need to contact your new credit card company and provide them with the following information:
- Credit card issuer name
- The amount of debt
- The account information
In some cases, the new card issuer will ask you for the card information with the outstanding balance as you’re filing out the initial card application.
It can sometimes take a few weeks to process, so be sure to continue paying at least the minimum on the first card until the balance is officially transferred.
Once you complete a balance transfer, don’t close off your original card -unless it has a high annual fee. You may have accrued reward miles or points which will be useful for redemptions.
When using a balance transfer credit card pay attention to the following:
While using a balance transfer credit card can save you a lot of money, there are a few things to keep in mind.
First, check if your new low/no interest credit card charges a balance transfer fee. most balance transfer credit cards come with a balance transfer fee, which is likely 3% to 5% of the balance. So for a $1,000 balance, the new card issuer will charge you between $30 and $50 in fees.
Also, balance transfer credit cards usually have time limitations. For example, the BMO® CashBack® Mastercard® offers a 0.99% introductory interest rate on Balance Transfers for 9 months and a 2% fee applies to balance amounts transferred*. After the 9 months the interest rate will increase to 22.99%. To avoid high interest, you can either pay off the card balance before the end of the intro APR period, or you can transfer the balance again.
Typically, you cannot transfer a balance to another credit card from the same issuer. For example, Balances from other BMO credit card accounts are not eligible to be transferred.
You also can only make a balance transfer up to your credit limit — and sometimes even less, depending on the issuer. For example, if you’re transferring a $5,000 balance from card A to card B, the second card must have at least a $5,000 credit limit to complete the transfer. Check what amount you are approved for ahead of time by calling customer service. It is also a good idea to check your credit card score here.
Some balance transfer cards come with additional benefits that you may be able to use. For example, the BMO® CashBack® Mastercard® also offers up to 5% cash back in your first 3 months. However, you won’t earn cash back on the balance transferred. Rewards only apply to purchases made using the card.
And last but not least, you must pay the minimum monthly payment each month on the balance transfer credit card. If you fall behind, the credit issuer may revoke the balance transfer promo.
Save on interest payments
The biggest benefit of a balance transfer credit card is the ability to save on interest payments. And the numbers can be significant.
Say you have a $1,000 balance, and you have 12 months to pay it off with a 1% balance transfer offer, you will need to pay at least $85 per month to pay if off.
$1,000 balance with a 1% interest rate is approximately $10 in interest payments. Compare this to $1,000 at a 19.99% interest rate (average rate for Canadian credit cards) which would cost approximately $199.99 in interest payments. A savings of over $180 in interest charges.
Bottom line on credit card balance transfers
Holiday credit card debt is not a great way to start off the new year, but a low interest intro APR credit card is an excellent option to refinance credit card debt. So, if you’ve spent more than you aimed to, consider applying for a credit card with a low interest intro APR balance transfer offer.