Credit Cards

Use low balance transfer credit cards to lower your monthly payments

By: John Shmuel on July 31, 2017
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Debt is one of the biggest issues facing Canadians right now.

According to TransUnion, the average Canadian carries $21,696 in non-mortgage debt — with credit card debt comprising a sizable chunk. The stats aren’t too surprising. We live in a society that is increasingly pressuring us to travel more, look better and own a home or condo over renting. Keeping up with the Joneses is now more expensive than ever.

But credit card debt is definitely not something you want to have.

The average credit card charges you 19.99% APR (that’s annual percentage rate) for any debt you carry. By comparison, the prime rate banks use to determine lending currently sits at 2.95%. Credit cards have much higher interest rates because the loan is not secured — it’s not backed up by an asset such as a house or vehicle the way a mortgage or car loan is. Thus, lenders pass on the risk by charging higher interest rates.

If you’re carrying a credit card balance every month, keeping up with payments can be difficult. Interest accumulates quickly.

That’s why it’s important to understand one of the most helpful mechanics in the credit card world: balance transfers. Many lenders offer promotional rates if you transfer existing balances to their cards, which helps lower your monthly payment.

Find out how to take advantage of balance transfers below.

Start by creating a budget

If you’re saddled with credit card debt, start by creating a budget to understand how much money you can direct toward paying down your statement every month. It’s important to have as much money as possible going toward this task.

Start by using apps like Mint or Clarity, both of which help track your spending and identify areas where you’re wasting money — meaning you can adjust your behaviour and put more cash toward paying down debt.

Budgeting is going to be important before you start taking advantage of balance transfers. Because the goal is going to be to aggressively pay down your debt once you have a promotional offer that lowers your interest burden.

Pick the right card

There are a lot of promotional offers out there, but the ones you want to take advantage of are the ones that offer 0% interest for an extended amount of time. That will allow you to whittle down your debt so that if you are paying interest in the future, your payments will be smaller.

Banks occasionally offer such promotions on their branded cards. But this is a matter of timing. You might get lucky and be mailed a promotional rate, but often times, it can be months before they float a zero offer.

There are a few cards on the market right now that offer 0% interest. One is the MBNA Platinum Plus Mastercard, which will give you 0% for 12 months and then 21.99% in the time after. The latter rate is not fantastic; meaning it's important to pay off as much of your debt as you can during your promotional period. Once that wears off, it's time to start looking for a new offer — or calling your current lender to try and negotiate a better rate. 

Negotiate interest rates

This is something not enough people know about. Everything from the interest rate on your credit card to your rewards are negotiable. If your promotional balance transfer rate has expired, then give your card provider a call.

Negotiating a lower interest rate will require a few things. First, you need to have some history with the lender. If your account is only a few months old, the lender might be reluctant to lower your rate. But if you’ve been a reliable customer for a year, and you’ve made your payments on time, then it’s likely that your card company will do something for you.

Pay off debt aggressively

Ultimately, using low balance transfer cards should be a tool to help you pay down debt faster. Many of those in credit card debt find themselves just barely treading water every month as high-interest rates make keeping up with payments difficult.

Take advantage of balance transfer offers to eliminate interest and use your money more efficiently to pay down debt.

Looking for balance transfer offers?

Use our comparison tool to see which credit cards are currently offering low balance transfer offers.

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