Learn about the benefits and how to choose the right credit card for a balance transfer.
If you’re having trouble paying off your credit card debt, a balance transfer could help you get back on track.
A balance transfer lets you use a credit card to pay debt on another credit card. This could save you money if you’re moving the balance to a card with a much lower interest rate. Card issuers often have balance transfer offers, sometimes with rates as low as 0%.
How balance transfers work
When you transfer a balance to a credit card, the new issuer pays off the debt on your old card. That balance is then moved to the new card, which you’re responsible for making payments on.
How to do a balance transfer
Apply for a card with a low-interest rate offer on balance transfers. Or use an offer on a card you already have. To qualify, your account has to be in good standing.
Request a balance transfer. You need to know the amount of debt you're moving, your account information and the name of the card issuer.
Keep making payments on your old card. You’re still responsible for any charges and interest until the balance transfer is approved. This could take anywhere from a few days to a few weeks.
Avoid making new purchases while you’re paying off your balance transfer, so you don’t get into more debt.
Pay off your balance before the offer period ends or pay it off as soon as you can. If you have a remaining balance, you’ll be charged the regular balance transfer interest rate.
How much does a balance transfer cost?
Most issuers charge a balance transfer fee of around 1% to 5% of the amount you transferred. The fee is usually added to your balance. So if the fee is 3% and you transferred $2,000, you’ll be charged $60, bringing your total to $2,060. Sometimes, an issuer will waive the fee or offer a lower fee as part of a promotion.
Benefits of a balance transfer
The purpose of a balance transfer is to help you pay off your debt. This means paying as little interest as possible. For example, if a card has an introductory interest rate of 0%, you have a chance to pay off your balance without accumulating more interest.
Balance transfers can also help you manage your payments. If you have balances on multiple credit cards, consolidating your debt onto one card means fewer payments to keep track of.
Paying your debt off faster can also boost your credit score. Balance transfers can help you reduce your overall debt, which also gives you more available credit on your card. Both outcomes are good for your credit score.
Factors to consider when you’re deciding to make a balance transfer
Promotions: You want to pay your debt off as quickly as possible. So the lower the interest rate, the better
Promotional period: Check if the offer is long enough for you to pay off your balance. When the promotion ends, the interest rate goes back up. If you’re still carrying a balance, you’ll have to pay a higher interest rate
Card issuer: You can’t transfer a balance to a card that’s from the same issuer. For example, if you want to transfer a balance to a CIBC card, it has to come from a non-CIBC card
Credit limit: The amount you can transfer depends on the card you’re moving your debt to. For some cards, the maximum amount is the card’s credit limit. For other cards, it’s 50% of the credit limit
Credit score: To qualify for the best balance transfer offers, you usually need good credit
No interest-free grace period: Unless you’re using a 0% interest rate offer, you’re charged interest as soon as the balance transfer is posted to your account
New purchases: The promotional balance transfer interest rate only applies to the balance you transferred. That means for new purchases, the higher regular purchase rate applies
Balance transfer promotions
The best balance transfer promotions offer 0% interest. This means for the length of the offer, you’re not paying any interest on the balance you moved.
For example, if a card has a promotional interest rate of 0% for 12 months, you won’t be charged interest on the balance you transferred during that time. This means you can pay off your debt faster than if you were charged the regular interest rate for purchases.
Worried you can’t pay off your balance before the offer period ends? Look for a card with a great balance transfer offer and low standard interest rates. This may be a good option if you carry a balance from month to month or plan on making new purchases while paying off your balance transfer.
Your balance transfer questions answered
Balance transfers are usually used for credit card debt. But some issuers also let you move balances from other accounts, such as personal loans, student loans or lines of credit.
Balance transfers can help you pay off debt faster, which can improve your credit score. Debt is an important factor credit agencies consider when determining your credit rating. The less debt you carry, the better.
If you’re applying for a new card with a balance transfer promotion, you’ll need to go through a hard credit check. Hard checks show up on your credit report and can put a dent in your score, but it’s minor and temporary.
You won’t earn rewards on a balance transfer because they’re considered a different type of credit card transaction than purchases. But remember that the purpose of a balance transfer is to pay off your debt, not maximize rewards.
Promotional balance transfers
A percentage transfer fee will be charged to your account when the balance transfer amount is posted. If your amount due is not paid in full by the due date, the regular purchase interest rate will apply on the transfer fee from the date the fee is posted.
Interest on the balance transfer amount may be charged on both your CIBC account and the non-CIBC account(s) from which you are transferring a balance until the transferred amount is credited to the non-CIBC account(s).
If you make a payment greater than your minimum payment up to your amount due, the excess amount is allocated to your regular annual interest rate balances and your promotional interest rate balance transfer balances in the proportion that each represents of the remaining balance.
After the promotional period, any remaining balance transfer balances will be charged interest at the regular annual interest rate for balance transfers, until the balance is repaid in full. For example, if you transferred $3,000 but could only pay off $2,000, you’ll be charged the regular balance transfer interest rate for balance transfers on the remaining $1,000. So, try to pay off your entire balance transfer balance before the promotion ends.
