credit card balance transfer

How does credit card balance transfer work?

To the point Credit card balance transfer is a tool that must be used wisely. Here are our tips if you ever need to use it.

Balance transfer

At milesopedia, we encourage our readers to first be good managers of their personal finances before getting started with the points. For example, to have an excellent credit report, it is important to master different concepts:

  • Being punctual when time comes to pay our balance
  • Having a reasonable “available credit” ratio
  • Our credit history
  • The types of credit held
  • New credit applications

Credit cards balance transfer can help those who would temporarily find themselves stuck with high credit cards interest rates, if done properly.

A lower interest rate

Most credit cards issuers offer balance transfer with low interest rates from time to time. The objective is to attract your customers by offering rates from 0% to 5%, well below the current rates of 19% and more.

This lower interest rate may save you temporarily if you currently pay interest on your credit card balance. However, make sure you read all the terms and conditions related to the balance transfer.

Terms and conditions

There are different terms and conditions that govern a credit card balance transfer, and not complying with them can be counterproductive!

Balance transfer fees

Credit card balance transfer offers often come with a fee (around 1 to 3% of the amount transferred). These fees will depend on each credit card issuer, but also your province of residence.

For example, with this offer, you can get 0% for 10 months:

Balance transfer period

Generally, you will be able to make a credit card balance transfer for a limited period of 90 days from the date the account is opened.

This is a way, for example, of consolidating different credit card balances on the same card. So plan your move well so that you don’t miss the promotional period.

Duration of the promotional interest rate

The promotional interest rate for balance transfers is usually between 6 and 12 months.

This means that your transferred balance will only benefit from the promotional interest rate for that term. Beyond this period, the standard rates will apply.

Again, make sure you plan your balance transfer well by having a plan to pay off your balance before the promotional rate term ends.

Missed payment clauses

Make sure you do NOT miss ANY payments on your new card.

Indeed, the terms and conditions often come with “rates in case of default”: if you miss several consecutive payments, the promotional interest rate will cease to apply and the rates will rise to the level of the standard rates.

As with any new credit card application, please take a few minutes to read all the terms and conditions before applying for it!

Additional advice

Transferring a credit card balance can be a good backup solution. However, you must be very careful with how you manage this debt. Here are 3 more tips to follow.

Plan your repayments

Make a game plan to repay your debt by scheduling regular payments over the duration of the promotional rate (6-9-12 months).

Have you transferred $6,000 and are taking advantage of a 0% promotional rate for 12 months? Schedule payments of $500 per month for the next 12 months to completely erase your debt.

How Does Credit cards Balance Transfer Work?

Temporarily stop using credit

The credit card balance transfer should not be an opportunity to continue on the path of indebtedness. Take a break from credit while you pay off your current debt.

No purchases on the new card

To get a clearer picture of your finances, don’t make any new purchases with your new card . Just pay back the transferred balance gradually according to the established schedule.

Make an appointment with a specialist

Don’t wait until you’re in trouble to make an appointment with a personal finance specialist. This could start with your bank advisor who can offer you financing solutions that are much cheaper than credit cards, for example!

Balance transfer offers

Come to discuss that topic in our Facebook Group!
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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