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  Balance Transfer Credit Card Canada

  
  
  

  What is a balance transfer?

  
  From Financial Consumer Agency of Canada:
  
  

  A "balance transfer" is the amount of money that is transferred from one credit card to another. The purpose of a balance transfer is to pay your balance off on an existing credit card by "transferring" the balance from your old card to your new one. This usually happens when you switch from one credit card provider to another, but it is also possible to transfer a balance from one card to another card issued by the same credit card provider. However, consumers should be aware that this type of transfer is usually treated the same way as a cash advance. This means that interest begins to be charged from the date you make a transaction. In many cases, when the balance transfer is related to a new account, the issuer of the new credit card may offer a reduced interest rate for a specific period of time.

  
  
  

  Fees that come with balance transfer

  
  
  There may be up front fees associated with a balance transfer.
  
  For example, MBNA charges 1% of the amount you're going to transfer. Let's say your amount is going to be $5,000. You will be charged a $5,000 x 1% = $50 fee for this transaction.
  
  If you're not planning to carry the debt for the full 6 months then this fee may be too expensive. You have to add the fee amount into the total interest cost of carrying the credit card debt. Balance Transfer Credit Card Canada
  
  Balance transfer fees are a very critical thing to check when doing a credit card balance transfer. It depends on the card issuer of how much fee they will charge to the client which can easily offset the interest. The majority of balance transfer transactions these days will charge a percentage of the amount involved in the balance transfer, with a minimum and maximum amount of charge fee.
  
  For example:
  A card company offers 3% fee on the amount of balance transfer made to the other credit card. There is a minimum fee limit of $5 and a maximum fee limit of $55. If you balance transfer $2,000, you will be charged with the amount of $60. If the client wishes to transfer $5000, you will be charged $55 (since 3% of $5,000 is $90, which is over the maximum balance transfer fee range which $5 to $55).
  The trend with these card issuers today is that they are removing their maximum charge fee limit. This mean that with the $5000 balance transfer in the example above, it would cost the card holder $150 instead of the $60 which is the fixed maximum limit. Clients must pay attention to the percentage imposed on the fee before doing a balance transfer.
  
  One way a card user will save a good amount of money is that when a client transfers from a high interest rate credit card to another credit card offering a lower rate, the client must choose credit cards that have long grace periods, such as the list in balance transfer credit card Canada. Another tip would be choosing the credit cards that have low balance transfer fees. It is advisable to compare balance transfer credit card Canada before applying for one.
  
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  Promotions

  
  
  Balance Transfers are usually a part of a promotion to lure in clients, or get them to use up their credit line.
  
  A credit card company will offer these promotions such as balance transfer credit card Canada to new customers who they're trying to lure over from other credit card issuers.
  
  There are 3 common promotions offered by card companies or banks. The first promotion allows that the balance transfer must last for more than 12 months. It is considered a good balance transfer because it allows a longer period for the client to settle the bills. The second promo provides no charges or fees when a client does a balance transfer. These fees can add up to the amount of payment that the card holder will settle. With no balance transfer fee, the customer is just obliged to pay the amount of balance sent to the other credit card. The third and last promo is when the card allows the client to have a balance transfer that has a high limit. This would make the client be able to send as much balance as possible.
  
  

  Who should do a balance transfer?

  
  
  Acquiring a new card
  
  If you have a high interest credit card (19.99%), the first thing to do is contact that company and ask them to lower their interest rate. If that company won't reduce your interest rate, then it may be time to apply for a card that offers a low balance transfer rate, such as balance transfer credit card Canada.
  
  If you're stuck with a high interest credit card then it's time to get a new card with a low balance transfer amount.
  
  Using an existing card
  You have two credit cards - MBNA & American Express. Both are at 18.99% interest rate. The MBNA card offers a very low interest rate to pay down other credit cards. You then use the MBNA card to pay off the American Express card.
  
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  Where can I do a balance transfer?

  
  You can usually contact the company by phone. They will tell you the offers they have that day for you, and then do the transaction for you. Balance transfer credit card Canada. They will read their disclaimer over the phone so that you understand the full deal.
  
  You can also go into your bank and make a request there. The customer service will easily be able to help you .
  
  

  Why should I do a balance transfer?

  
  This is all about saving money on interest costs. It's always better to take advantage of smaller credit interest costs when ever possible. You should do one if you've got high interest credit cards and you want to save interest. Balance Transfer Credit Card Canada
  
  How much interest Can I Save?
  It's best to illustrate the savings as follows:
  
  
  The amount of interest you can save will be based on your current interest rate, and the promotional rate you're being offered. In some cases the balance transfer credit card Canada rate isn't much better than your current rate, so there wouldn't be any benefit in doing the transaction.
  
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  What pitfalls should I watch out for

  
  
  

  There are two main pitfalls with these low interest offers:

  
  

  You get to the end of the term and your interest rate goes back to the original high interest rate. If you haven't paid off your full balance, you will need to budget for the higher interest cost.

  
  
  

  You may be tempted to keep applying for new credit cards that offer similar balance transfer offers.
  
  The problem with continuously applying for new balance transfer credit card Canada and closing the "old ones" is that it will hurt your credit score on your Equifax and TransUnion credit report, making it more difficult for you to be accepted for new cards in the future.
  
  Applying for new credit cards all the time shows the creditors that you have an unstable credit history. Creditors like to see a person hold on to a credit card for years, use it regularly, and then make payments ontime and as agreed. If you do this over a period of many years, it shows that you're stable credit wise and you are a stable user of balance transfer credit card Canada.
  
  If you keep applying for new credit cards every 6 months, you cannot show this type of credit stability, so your credit score will drop which will ultimately cause you to have higher interest rates, and not be accepted by future creditors.

  
  
  

  Bad Credit

  
  If you have bad credit and are applying for a new credit card, you may not be accepted when it comes time for the creditor to make a credit decision about you. If you're struggling with too much debt, your credit score may already be affected
  
  A bad credit can affect an individual in different ways. It can give you a less chance from being granted to have conventional credit cards. In getting loan approvals, the company or bank will not allow you because you have a history of unsettled bills. It is a gradual process for a person to have a bad credit as it doesn’t happen immediately. Bad credits have made a lot of people experience financial problems especially that client has a larger amount of debt and is unable to pay. It also affects the credit history of the client which is the basis for a card company to approve your application. Moreover, credit history is the record of a card holder past borrowing and repaying. This also includes information about the late payments and bankruptcy you went through. That is the importance of knowing more about balance transfer credit card Canada.
  
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  SEE ALSO

  
  
  Best Balance Transfer Credit Cards in Canada
  
  Choosing the Right Credit Card
  
  Intro to Balance Transfers Cards
  
  

  References

  
  
  WiseGeek - What is a Credit Card Balance Transfer?



FCAC - What is a Balance Transfer

FCAC - Getting the Most from Low Introductory Rates

External Links