Blog

How to Come Out Ahead on Credit Card Balance Transfers

By Debt.ca on June 9, 2014 No Comments

Credit card debt is one of the most profitable forms of debt for the big banks, so it should come as no surprise that banks are fighting for your business. If you have a large outstanding balance on your credit card and you’re already up to your ears in debt, a credit card balance transfer can seem like a lifeline. However, before you sign on the dotted line, it’s important to understand if this will help or hinder your financial situation.

What is a Credit Card Balance Transfer?

As the name suggests, a credit card balance transfer is when you transfer your outstanding balance from one credit card to another. If you’re carrying a balance on your credit card, why would you go through the trouble of transferring your debt to another lender? It’s because lenders typically offer low introductory interest rates on balance transfers as a marketing tactic to lure you in. Lenders hope that once you sign up for a credit card with them, you’ll take out other financial products like mortgages and lines of credit.

If you’re paying interest on your existing credit card at a typical rate of 19 per cent, you’ll quickly rack up credit card debt. That’s because credit card companies calculate your interest based on your daily outstanding balance – it can take you years and cost you thousand in interest if you only pay the minimum. Credit card companies offer balance transfer for as little as 0 per cent – that’s right, you could transfer your outstanding credit card debt and receive a break from paying sky high interest.

Why Should I Take Advantage?

If you’re running into temporary financial difficulties from job loss or illness, a balance transfer can offer a reprieve from racking up a lot of interest. While most insurance companies offer balance protection insurance, a balance transfer is usually a lot less costly since you avoid paying the monthly premiums of insurance.

Why Balance Transfer Might Not Be So Great

As the saying goes, there’s no such thing as a free lunch. Although credit card companies offer low introductory interest rates, there’s a catch. More often than not, there is a fee required to transfer your balance – most companies charge between one per cent and five per cent, based on how much you’ll be transferring. For example, if you’re transferring $10,000, you’ll typically pay between $100 (one per cent) and $500 (five per cent).

How Do I Come Out Ahead?

The best way to come out ahead with a credit card balance transfer is pay off your outstanding balance before the promotional period ends (typically six months). You can accomplish this by creating an aggressive repayment plan. If your cash flow is tight and you’re making extra payments on your mortgage, you should halt those payments immediately and instead use them towards paying down credit card debt. As long as you remain committed to repaying debt, balance transfers can be a great way to manage your debt.

Debt.ca

Admin


Top Tips for First Time Home Buyers

By Rubina Ahmed-Haq on April 26, 2017

This is the busiest time for real estate transactions in Canada. If you’re out shopping for a home it’s easy to get caught up and spend more than you wanted too. For first time homebuyers it can be an overwhelming experience. Before setting out to buy your first home here are a few ways you…

How Diversifying Your Transportation Habits Can Save You Thousands

By Jordann Brown on April 17, 2017

If you grew up with two cars in your parents’ driveway, you’re not alone. Like most Canadians, the generation before us spent thousands of dollars per year maintaining their vehicles, fueling them up and paying for them through car loans. For our parents, cars were a sign of freedom, mobility, and independence. Fast forward 20…

How to Budget For Summer Holidays

By Alyssa Davies on March 29, 2017

I know what you’re thinking – summer seems way too far away to be worrying about what lies ahead. However, that is exactly why you need to start planning and prepping for any upcoming expenses. Not unlike Christmastime, summer travel and events can end up being just as costly. Wedding season rolls around, camping trips…

Which Type of Debt Should You Repay First?

By Amanda Reaume on March 23, 2017

Some people feel very anxious when they’re in debt and want to pay it off as soon as possible. But if you have a lot of debt or if you have many different types of debt, then you might be confused as to which debt you should pay off first. The first thing that you…

No Comments Leave a Comment  

Leave a Comment

Free Savings Estimate

How much do you owe?

$100,000

$5,000
$100,000
Live Chat
Welcome to our Live Chat
Agents are not available at this time. Please leave a message. Thank you.
First Name
Last Name
Phone
Email
Postal Code
Debt Amount
 
PHP Live! powered