What’s the Deal with 0% Balance Transfer Credit Cards

You’ve seen the credit card offers before: 0% interest on balance transfers, or transfer your outstanding credit card balance and get this great (insert gift incentive here).  So what’s the deal?  Why would those offers appeal to already cash strapped consumers?

Here are the top 2 reasons why you’d want a credit card with a low balance transfer rate.

1) You Need to Pay off Credit Card Debt

Say you have an outstanding credit card balance of $5,000 and you’re paying $19.99% interest on the card.  You’ve heard it before, if you just pay the minimum balance every month, it will take you over 25 years to pay it off and cost you $9,182.73 in interest!  Insane!

So now let’s say you have a plan in place to pay off your credit card debt this year and you’re able to make a fixed payment of $500 each month to get it under control.  With your current credit card, it will take you one year to pay off the total debt and cost you $514.93 in interest over the year.

If you switch to a card offering a low interest rate on balance transfers, say 0% (you can’t get much lower than that!), then it will only take you 10 months to pay off your debt and cost you NOTHING in interest.  That’s a savings of $514.93!  And that’s why low rate balance transfer cards can be wonderful.

2) You Need a Short Term Loan

Say you plan on renovating the kitchen this summer or you want to invest in landscaping for the backyard.  If you put the cost of the work on your current credit card and then switch the balance to a low interest balance transfer card, then you essentially get a short term loan for peanuts.

Given that the going rate for a line of credit these days is roughly Prime +, you won’t get a loan for any lower than 3 to 4% interest.  But you could get a low interest balance transfer credit card and pay a rate of 0% to 1.99%.

What are the best low balance transfer cards in Canada?

So I’ve convinced you that getting a low interest balance transfer card is the way to go.  Which low interest balance transfer credit cards are the best in Canada?  Here are my top three picks…

#1. MBNA Platinum Plus MasterCard

You can’t beat 0% interest.  The MBNA Platinum Plus Credit Card offers no annual fee and 0% interest on balance transfers for the first 12 months. The perfect card if you want to get out of credit card debt, or have a 12 month interest free loan.

Learn More: MBNA Platinum Plus MasterCard >

BONUS 0% on Deposits!

This card ALSO offers 0% on deposits for the first 12 months. This means that you can transfer you balance from your credit card straight into your bank account interest free for 12 months. (Yes – you heard that correctly.) This is a great way to get a 12 month loan for 0%!

 #2. Scotiabank Value® VISA card

Scotiabank Value® VISA card

With this card you’ll not only enjoy 0.99% for the first six months, but afterwards you’ll also enjoy the benefits of a low interest credit card. The Scotiabank Value® VISA card comes with an 11.99% standard interest rate so if you’re a credit card debt re-offender, this will save you more money in the long run.

Learn More: Scotiabank Value® VISA card >

#3. RBC® Cash Back MasterCard‡

RBC® Cash Back MasterCard<sup>‡</sup>This card offers a 1.90% balance transfer for the first 10 months, no annual fee, and cash back rewards. You’ll not only save money on your interest, but you’ll enjoy 2% on grocery store purchases, and up to 1% on all other purchases. This option is great if you’re looking to get out of debt, while still benefiting from your purchases.

Learn More: RBC® Cash Back MasterCard‡ >

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4 thoughts on “What’s the Deal with 0% Balance Transfer Credit Cards

  1. You can get a secured card.It will take about 2 4 years berofe you can get an unsecured card.Best to wait to keep those inquiries off your credit report.

  2. You forgot to mention or maybe those cards don’t charge it but any time that I wanted to transfer to low or 0% cards there is in the fine print a charge of up to 2% on some for doing the transfer.

    • True – generally they charge 1% of the balance transferred. However, if you’ll STILL end up saving big time compared to a 19.99% purchase rate.

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