Should I Be Excited To Use A Balance Transfer To Clear My Credit Debt?

If you’ve got a high interest credit card with a lot of debt, it can seem like you’re trying to swim uphill with a weight on your ankle. Any payments you make don’t make a dent in the amount owed. It all goes to paying off the interest. All the while your credit score continues to suffer.

One of the solutions to this problem is to transfer your balance to a new lower interest rate credit card. While this can be a fantastic way to stop treading water, there are some things to know before you decide to make the move.

A Matter of Interest

The most obvious thing to research is which cards provide the best alleviation of interest. It might not be as cut and dry as choosing the card with the lowest rate. Some cards offer 0% for a shorter period while others might offer 2% for longer. Others offer low interest but add an annual fee; which amounts to the same thing as a higher interest rate.

Choosing the right card depends on how long it will take you to pay off the debt. Either way, make sure to pick a card that allows you to pay off your debt before the higher interest rate kicks in.

Rate Hub has compiled a list of the best balance transfer credit cards in Canada for 2022.

Fees On Fees

Always take a look at the different fees a credit card might charge. A low interest rate might peak your interest, but the fees might counter the savings you would have made.

There are two fees in particular many balance transfer cards have:

  • Annual fees: Some cards might have a $0 annual fee, while others are $30 a year. Even for a low amount, it can make a difference when you’re trying to axe your debt.
  • Balance transfer fee: Most balance transfer cards include a one-time fee to transfer your balance, usually around 1% to 3%.

Those fees can add up, especially if you have a larger debt. For example, let’s say you’re in debt for $7000. Even a seemingly small balance transfer fee of 2% combined with an annual fee of $30, means you’re paying $170 in additional fees. Money which could have been spent on paying down your debt.

Those fees can add up, especially if you have a larger debt. For example, let’s say you’re in debt for $7000. Even a seemingly small balance transfer fee of 2% combined with an annual fee of $30, means you’re paying $170 in additional fees. Money which could have been spent on paying down your debt.

Stop The Juggling Act

If you have multiple loans you’re trying to pay off, it can be tough keeping track of when to make payments and which ones should take priority. Consolidating all of your loans into a single balance transfer card can make things a lot easier. 

However, this is not a solution to underlying financial issues. The timing window for low interest is even more important here. If you can’t pay off the loan in time, you might end up worse off than before.

How’s My Credit?

If you’re trying to consolidate your debt, there’s a good chance your credit score is already bruised. Thankfully, most balance transfer cards know this.

However, to secure rates and fees that won’t harm you further, a score higher than 660 is recommended. If you can make consistent payments to get your credit score above that number, you’ll find much better options for balance transfer cards.

When checking your credit score, be sure to do a soft inquiry. While not as thorough as a hard inquiry, that latter lowers your score. It’s only ever a small amount (around 10 points), but when you’re trying to slowly improve your score, every point matters.

The good news is, once you consolidate your debt onto a single card, begin making steady payments, and eventually pay it off, your credit will keep improving.


There are many reasons someone might go into debt. If saying no to unnecessary purchases was one of the driving factors, be careful when it comes to consolidating your debt.

There are two main reasons low willpower and balance transfer cards don’t mix:

  • Closing out old credit cards will negatively impact your credit score. It’s best to leave them open.
  • When you start paying off your debt, you might start giving yourself more wiggle room when it comes to non-essential purchases. This can snowball into a situation where you start to make progress, then balloon your debt even further.

Once your balance is transferred to a new card, you can’t just take an old card and shove it in a desk somewhere. You need to use it, but only for purchases you can pay off in short order. You always need gas and groceries, so put those purchases on that old card and the moment you get home, pay it off using your debit card. This will also help improve your credit score.

If you have trouble controlling what you’re spending money on, a good budget makes all the difference in the world. There are plenty of fantastic budgeting tools out there including one from the Government of Canada.

We also have some budgeting tips everyone should know.

Mortgage Transfer

There is another option for helping clear up your debt. However, it should be used very carefully.

If you’ve racked up a large credit bill, you can roll that debt into your mortgage. This can dramatically reduce the interest you will be paying as most mortgages hover around 3%.

Here’s the big caveat: While this can be an excellent tool for getting you out of a bad situation, whatever you spent that money on, you’re now going to be paying for it for the next 30 years (or however long you still have left on your mortgage).

So, that once-new TV you bought has been sitting in a landfill for 5 years, and you’re still making payments on it. Not ideal.

A mortgage transfer should always be a last resort. If you feel like it’s you only option though, talk to us first.

At the end of the day, a balance transfer card and other balance transfer tools can be an incredibly valuable tool for helping pay off your debt. Just be sure you’ve addressed the underlying issue which caused your debt to grow in the first place.

Get a low interest card, with low fees, make steady payments, and you’ll be well on your way to improved credit and a debt-free life!

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