According to credit monitoring agency Equifax, Canadian credit card debt recently totaled more than $100 billion for the first time.
With debt mounting, many wonder whether they should be doing a credit card balance transfer. A credit card balance transfer is when you move an outstanding balance from one or more credit cards to another credit card (typically with a lower interest rate).
This is often done to save on interest costs and consolidate debts, making it easier to manage and pay off the outstanding balances.
But what are the pitfalls and benefits of these credit card balance transfers? Let’s find out here.
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When it comes to consolidating and paying off credit card debt, a balance transfer can be a useful strategy. However, before proceeding, it’s crucial to be aware of potential pitfalls. In Canada, some common balance transfer pitfalls include balance transfer fees, introductory interest rates that increase after a limited time, loss of interest-free grace periods on new purchases, the potential impact on credit score due to hard credit checks, limited balance transfer amounts, and ineligibility for rewards or promotions. Missing the balance transfer deadline could also result in losing the promotional interest rate. To avoid these pitfalls, carefully review the terms and conditions of any balance transfer offer and create a plan to pay off the transferred balance before the promotional period ends. Avoid making new purchases on the card until the transferred balance is paid in full.
On the other hand, a balance transfer can also offer several benefits if used responsibly and strategically. Some of the benefits include lower interest rates, consolidation of debt, an improved credit score over time, the opportunity to switch issuers, and temporary financial relief. To maximize the benefits of a balance transfer, it’s important to have a clear plan for paying off the transferred balance before the promotional interest rate expires. Avoid new purchases on the card until the balance is paid off, and make sure to pay your monthly statement on time to avoid late fees and potential interest rate increases.
Remember that a balance transfer can be a useful tool to manage and pay off credit card debt, but it’s important to consider the terms and conditions, fees, and interest rates before proceeding.
The Toronto House Canada.
