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Credit cards that offer a low introductory interest rate on balance transfers are a smart solution for getting out of debt fast. But recently, low (or no) interest balance transfer credit cards have been disappearing from the Canadian market. An expert looks at what's happening with balance transfer credit cards and the alternatives if you're looking to get out of debt faster.

Balance transfer cards have always been one of the best ways for consumers to easily consolidate high-interest debt. Basically, it means transferring high-interest credit card debt to a new credit card with a lower interest rate, thereby allowing you to pay it off faster and save money on interest charges.

However, good balance transfer cards with competitive rates are becoming increasingly hard to find. The best of the bunch usually boast a low introductory interest rate – usually between 0% to 12% – on the amount transferred and offer a promotional period of between 9 to 12 months.

To do the transaction, balance transfer credit cards typically charge 0% to 3% in fees to transfer an existing balance from another credit card, but some don’t charge anything at all. Because most credit cards have interest rates of 19.99% to 24.99%, consumers can reduce the carrying costs of their debt by more than half.

Unfortunately, balance transfer credit cards are disappearing from the consumer market. In this article, we look at why balance transfer credit cards are harder to find, and if you’ve got high-interest debt, what the alternatives are to balance transfer credit cards.

Why are there fewer balance transfer credit cards now?

The reason there are fewer balance transfer credit cards available to Canadians is disappointing but predictable: these cards simply don’t make enough profit for the banks that issue them. Banks get more money from a customer carrying a debt load at 19.99% than 12.99%, so it’s no surprise they’re trying to keep customers on higher interest cards.

Nevertheless, even though balance transfer cards themselves are disappearing, the option isn’t entirely gone. While there are fewer balance transfer credit cards on the market, you can still use the balance transfer feature for virtually any credit card, including low-interest credit cards. However, unless your credit card provider has given you a promotional offer, you’re going to pay a premium for balance transfers on your credit card.

With this option, expect to pay a 1% to 3% balance transfer fee to move debt from one credit card to another. Furthermore, expect your balance transfer to be treated like a cash advance from your credit card, and subject to a higher interest rate. Most credit cards have cash advance interest rates ranging from 21.99% to 29.99%, much higher than the purchase interest rate on the same cards.

For this reason, while balance transfers are still possible on any credit card, it’s an undesirable option for those looking for affordable ways to consolidate debt. If you’re dealing with multiple high-interest credit cards, you want to find a workable solution that will lower your interest rate and provide you with manageable payments to get out of debt.

Alternatives to balance transfer credit cards

One of the reasons balance transfer credit cards were so popular was because they were so easily and readily accessible. Often all you needed to do was apply online from the comfort of your own home. You often could usually initiate the balance transfer as part of the credit card application, allowing you to take care of everything all in one step.

Even though balance transfer cards are disappearing, there are some excellent affordable alternatives taking their place. Personal loans, lines of credit, and credit counselling services all provide attractive options to help Canadians consolidate debt. Best of all, most of the applications are easy to complete and can be done completely online.

Personal loans

A personal loan is an excellent alternative to a balance transfer credit card. You can apply for a personal loan from your bank or an online lender. Personal loans have interest rates ranging from 5% to 15%, or sometimes higher, depending on the lender.

Often the interest rate on the personal loan you apply for will be determined by your credit score, but many lenders consider other factors, such as your income history, residence, and other financial assets. There are some simple things you can do to improve your credit score fast, including using a digital service called Score-Up — “smart” consultation software that can help you achieve your desired credit score fast.

Personal loans are a great option because they offer a fixed term and fixed interest rate. You use the personal loan to consolidate your personal credit cards, then you make one monthly payment towards the personal loan until it is paid off in full.

Lenders like Loans Canada or Loan Connect can provide you up to $50,000 to consolidate debt. Interest rates range, and if you’re consolidating a large amount of debt across multiple credit cards, a personal loan from either of these lenders is the best solution.

If you have bad credit, you could also apply for a bad credit loan. Just note that the interest rates will be much higher and it might not make financial sense if your credit card interest rate is lower.

Learn more about Loans Canada

Lines of credit

A personal line of credit is typically offered by a bank. It is a form of revolving credit that can be either unsecured or secured by an asset, like your home. Lines of credit typically have interest rates ranging from 3% to 12%, making them an attractive alternative to credit cards.

Unlike a personal loan, a line of credit has more flexible repayment terms and can have a variable interest rate. This can be great if you want a more flexible repayment plan for your debt. However, it can also make you more likely to stay in debt if you’re not disciplined about paying it off.

Moves Financial provides lines of credit up to $2,500, and specialize in offering these to self-employed workers in the gig economy. If you primarily earn your income through Uber, Instacart, TaskRabbit, or a similar source, Moves is ideal. They’ll use your income history instead of your credit score to determine your eligibility.

Whether you choose a personal loan or a line of credit to consolidate your debt, the most important thing is that you don’t rack up any new debt!

Credit counselling services

Credit counselling services are an excellent option for people who feel overwhelmed by their debt and are not sure what is the best path forward. Consolidated Credit provides credit counselling services to give you both advice and a solution to dealing with your debt. You can sit down for a free consultation to explore your options, build a workable budget to fit in your debt payments, and debt consolidation solution for your personal situation. If necessary, they’ll even negotiate directly with your creditors to reduce or eliminate the interest charges on your balance owing to get you out of debt faster.

Most credit counselling services include a debt consolidation loan, but because they include counselling services you get help with your financial strategy and habits, not just another financial product!

Learn more about Consolidated Credit

Final thoughts

While balance transfer credit cards are disappearing, there are still plenty of options for Canadians to consolidate high-interest debts. Personal loans, lines of credit, and credit counseling services provide simple, low-interest solutions so you can get out of debt faster. Which one is best for you depends on your needs and circumstances, but rest assured there are tools out there to help you improve your finances!

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