How (and how not) to transfer a credit card balance

How NOT to Transfer a Credit Card Balance

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Last updated on January 13, 2022 Comments: 33

Balance transfers are one of the most effective ways to lower the cost of your credit card debt. Where else can you access a 0% interest rate for 10 months? However, there’s a right way and wrong way to do a balance transfer.

Do it the wrong way and credit card issuers have a sneaky trick that can cost you more than you think, even if you’re making your payments on time, every time. Do it the right way, and it’s as good as it looks.

Here’s the rub. People get into trouble when they transfer a balance and make new purchases on the same credit card. Some people also fall into more debt by letting others balance transfer onto their credit card. The reason why these are problems is because of the way credit card issuers allocate your payments. It’s always best to keep your balance transfer credit cards separate from a credit card you use for purchases. Here’s why.

Proportional Payment Allocation

When you make a credit card payment, your credit card issuer has a choice of how it can allocate your payment among the various balances on your card. For example, on one card you may have a balance of 0% from a balance transfer, 19.9% from a purchase and 24% from a cash advance.

Your credit card issuer can then choose to allocate your payment to your highest interest rate balance first, to your lowest interest rate balance first, or proportionately based on the size of each rate’s balance. Each methodology has different cost implications for the cardholder.

In general, in Canada, if your credit card account consists of balances with different interest rates, such as purchases at the standard interest rate and cash advances at an introductory or promotional interest rate (e.g., a special lower rate balance transfer or a temporary lower rate on all cash advances), any payment that exceeds the minimum payment due will be allocated to those balances in a proportionate manner.

Your payment will not be applied to the balance of your choice, such as the balance with the highest interest rate. For example, if your balance from purchases at the standard rate is $700 and you have a balance from a cash advance of $300 at a 0% promotional interest rate, proportionate allocation means that 70% of your payment will be allocated to your purchase balance and 30% will be allocated to your cash advance balance.

Of course, you would rather 100% of your payment be applied against the balance with the higher interest rate, so that the balance declines faster, paying less interest, costing you less.

With proportional allocation, the only way for you to get rid of your high interest balance is to pay down your low interest balance completely. However, if your low interest balance is high, which most promotional rate balance transfers typically are, your high interest balance will be “conserved” as the banks call it, until your low interest balance is paid off.

The more low interest balance you put on the card, the longer the high interest balance lasts. It’s counter intuitive, but that’s how it works. The good news is, it’s really easy to avoid.

Beating the System is Easy

How can you regain control of your payments and pay down your highest-interest balance first? The answer is actually pretty simple: Use one card for balance transfers only, and another low interest credit card for purchases only. (See our list of the Best Low Interest Credit Cards for some card options.) You then determine how much of one balance you want to pay down versus the other, allocating the payments to each card yourself.

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Article comments

Suzanna says:

I have an RBC credit card and a Canadian Tire credit card. Do I have to wait for balance transfer promotions in order to transfer my CT balance to my RBC card?

Daniel from GreedyRates says:

Hi Suzanna,
You’ll want to ensure that there is indeed a balance transfer promotion in effect on your RBC credit card before you transfer your Canadian Tire balance to the card.

Taz says:

Thanks for information and guidance.
I would appreciate if anyone could answer or clarify the following question. How can I do balance transfer from a credit card to a line of credit to benefit from 0% interest rate.

So I have a credit card with good score and always manage to pay it fully off. It has high credit limit. Also, I have a credit line with the same bank. It’s balance approximately 15-16K.

So if I get a balance transfer offer with 0% for a few months, can I transfer it to my main credit card that I use. So I will have extra credit in my main credit card. Therefore, the balance would be – few thousands (negative balance). Then once the balance transferred is settled in the main credit card, I will pay my line of credit via the main credit card.

I am thinking of this option as the balance transfer offer states it’s applicable to other credit card (not to line of credit). Also, I am afraid that it will be considered as cash advances (if they consider the option to transfer it to a line of credit).

I would appreciate your explanation and answers.

Daniel from GreedyRates says:

Hi Taz,
Balance transfers are available for you to transfer existing debt to take advantage of the low (or no) interest rates so you can manage debt more effectively. It’s unlikely that a balance transfer can be used in this way but your best bet will be to contact your financial institution to get the official word for your use case. Good luck.

Remy says:

I have $10,000 racked up on a TD visa. Would I be able to transfer the balance to a trueline mbna mastercard or is that not possible? If not what would be the best way to pay this down without getting a LoC? I already tried to get a LoC and was turned down, I was hoping that the trueline mastercard would be my saving grace until I noticed the TD part. Any advice would be greatly appreciated.

Aaron Broverman says:

Hi Remy,
You can try, but since MBNA is owned by TD and transfers between TD cards don’t qualify, it may not go through. Also you need a percentage of the balance as the transfer fee, so it also may not go through if you’re unable to pay the fee. Perhaps you can negotiate a better interest rate from your credit card issuer or pay down the balance until it’s slightly more manageable and then transfer it to another card with a low balance transfer rate. Read this article for other cards that have low balance transfer rates for inspiration: https:// www. greedyrates .ca / blog / best – 0 -balance – transfer – credit – card – offers – canada / Perhaps the PC Financial Mastercard could work.

Nicky says:

I currently have about 40,000 on a TD card and am wondering how best to tackle paying it down? Moving to a low interest line of credit and paying down there? Is it best to then cancel the card to avoid proportional allocation? I have a great credit rating and have made minimum payments to date.

Aaron Broverman says:

Hi Nicky,
Yeah. As you probably already know, a credit line is probably your lowest interest option for paying off debt, especially if it’s such a significant amount that realistically will likely not be able to be paid off during a six to 12 month low interest promotional offer a credit card might have. Oh, and of course, high interest private loans are a no go because you’ll end up paying more in interest than the actual principle of the loan.

Richard says:

I have a Capital one MasterCard (Costco) and would like to transfer balances monthly to my wife’s TD Visa ( in order to rack up travel points) our credit scores are over 824 monthly , is there a way to do this without fees ? Thanks

Aaron Broverman says:

Hi Richard,
I don’t know what TD Visa your wife has, but the answer to your question is probably no. Typically with balance transfers you will have to pay at least 1% of the balance as a fee. Look at your wife’s cardholder agreement (typically available online) to find out exactly what the fee is on her card for a balance transfer.

Sim Jatt says:

You cannot collect any points or rewards while doing a balance transfer if thats what you’re thinking.

Deborah says:

I got a Scotia Visa about 10 months ago and transferred about $2500 from Capital One. Capital One raised my limit to $7500. I currently have $1989.06 on the Scotia Visa and $5514.74 on my Capital One. I have been making way more than the minimum payments, but I am paying 12.99% to Scotia Visa and 19.99% to the Capital One Card. I am in Ontario Canada and I am wondering if I should transfer balances to another card with a lower rate or just keep paying extra on these cards. My credit rating is 725. Please let me know how this would affect my credit also. Thank you.

Aaron Broverman says:

Hi Deborah, as someone with a very good credit rating who pays on time on a regular basis and due to COVID-19, you should try to call both credit providers and see if they can lower your interest rate. Sometimes it’s difficult to get approved for a balance transfer when you just did a balance transfer not too long ago, but you can try. This should have minimal affect on your credit, but you will likely pay a fee that will be a percentage of the amount transferred, so make sure you read the fine print of the card’s benefit agreement.

Sesi says:

I recently got the 12.99% MBNA true line MasterCard with 0% interest on balance transfers for 10 months.
So I have 5000 balance on 3 different cards (including a TD visa credit). The card says I can transfer the balance to a different credit card or to my checking account. Will the 2nd option be considered a cash advance and the interest will be charged at 24.99%? Or will the interest on it be at 12.99% after the promo period ends?

Aaron Broverman says:

Hi Sesi,
I believe you can only transfer a balance from an existing credit card (a credit card that isn’t issued by TD bank or any of its affiliates) and you cannot transfer the balance to your chequing account. It is outlined in the fine print for this card that the interest rate on the balance transfer will go up to 12.99% once the ten month promo period ends, which is the same interest rate for purchases were you to add to the balance.

Pam says:

So, if I applied and am accepted for this card can i get say $5000 into my chequing account instead of transferring from another credit card and would that qualify for the 0% interest rate for the promotional period?

Aaron Broverman says:

Nope, only applies when you’re transferring an actual credit card balance.

Paul says:

In Canada yes it says 0% but they really are a 3% fee upfront.

How is that compared to a LOC with a rate of 5.65% that you only have the daily interested added each month?

Aaron Broverman says:

Hi Paul,
A line of credit usually would come with a lower interest rate (so I would look for one with a lower rate than just over 5%. It’s usually a better deal to transfer your balance to a line of credit because interest rates are usually lower compared to credit cards or loans. However, they do usually also come with higher approval standards than credit cards or loans.

David says:

Has anyone had any luck refunding purchases made accidentally on a card that has a balance transfer? What are the chances of that working?

The GreedyRates Team says:

Hi David,

Interesting question. If we’ve got this correct, then you currently have a credit card that you’ve used to transfer balances, and you’re now wondering what happens if you need to return an item that you’ve also purchased with this card. Despite that you shouldn’t be purchasing anything with a balance transfer card, as it can create separate balances at different interest rates and really mess up how your monthly payments are split, there should be no consequences for handling any returns.

If you bought the item less than a month ago then the eventual return credit from the store will wipe out your new second balance (for purchases versus transferred balances), which will be zero again once your statement comes due: assuming you return it and it’s processed in time. If not, then the bank may take your payment and split it unfavorably between the two balances according to regulations mandating that the highest-interest balance be paid first. This could impact your ability to reduce your principal transferred debt, so take care of the situation soon. Good luck.


Ben says:


I have 3 credit cards. I don’t have any balance on all the 3 credit cards currently but expecting a large payment requirement in the coming months. i have a Balance transfer offer of 0.99% for 6 months. Can i do a cash advance on my two cards and transfer the money to my chequings and do a balance transfer of those cards on my third card which has the promotional offer so that i dont have borrow or take a personal loan from the bank. Is this workable?

The GreedyRates Team says:

Hi Ben,

Thanks for the awesome comment and inquiry about balance transfers. It’s always difficult when you’re weighing whether to take a loan or a balance transfer, and the answer will generally be wherever you get the lowest interest rate. It’s also relevant to factor in how large your upcoming payment will be. Large transfers that need a substantial time commitment to repay might be better off with a bank loan, because banks tend to hold interest rates steady and won’t increase it after a promotional period.

If you’re able to hold three credit cards without also having a balance, our guess is that you’re more than capable of handling new debt responsibly, so a balance transfer will suit you just fine. Thankfully, your bank has already provided you with a promotion that sounds quite valuable, and the transfer method you describe in your comment will work. You can max your credit on two of your cards by transferring cash to your chequing account, and then consolidate your two new balances with your third bank at the promotional rate of 0.99%.

It won’t matter that you’re moving multiple balances, as most banks allow you to consolidate as many as can fit in your approved credit limit. Don’t worry about transfer fees either, because 1.00% of two or three separate transfers is still 1.00% of the whole. Also remember that while you’re not going to a bank and requesting a loan explicitly, doing a balance transfer is still essentially borrowing money from a bank—now you just have a 6-month clock running until your rate rises. Good luck!


Crystal says:


Just wondering if it makes sense to transfer the balance from my line of credit to a credit card such as the one you mentioned. My thought was to transfer the $10k balance from my LOC to the 0% credit card for the offer period. This would save me an approx. $80 interest payment monthly. Then when the offer period came due, pay the credit card off with the LOC, essentially buying me a free 6 months, no interest, so I can focus funds towards paying the actual balance?

Is there anything o haven’t considered for this scenario to work? Thanks so much!

The GreedyRates Team says:

Hey Crystal,

Thanks for the great comment and your interest in a balance transfer credit card. Balance transfer cards provide transfer options for all types of loans including lines of credit, other credit card balances, bank loans and more. Your $10,000 line of credit can be transferred to a card like the MBNA True Line Gold Mastercard, if you’re approved for a high enough credit limit. However, instead of planning to bounce back and forth between your line of credit and potential 0.00% transfer card, why don’t you simply do the transfer and put your monthly interest savings directly towards the balance anyway? The MBNA True Line Gold Mastercard is meant to shelter high-interest balances temporarily so that you can make larger payments to it during the promotional period with the money you’re saving now–not later. If your line of credit has a high interest rate and you’d rather have 0.00% for 6 months and then 8.99% afterwards, get the card. Be sure to apply via our link as well. Best of luck!


Greg says:

Is it possible to do a balance transfer with the promotional rate but transfer the funds to a bank account (chequing) instead of directly transferring to the other credit card?

The GreedyRates Team says:

Greetings Greg!

Great questions. We understand where you’re coming from and will tell you exactly how to get what you need. When doing a balance transfer, it’s possible to take one of two strategies. The first is that the bank will simply let you to transfer existing balances (debt) from other banks to them, at a temporary lower rate. Your old balances are wiped out and replaced with one new balance at a single bank and with a lower rate. The second strategy is to advance cash up to your approved credit limit to another bank, which accomplishes the same thing.

In your case, this means that if you were to apply for the MBNA True Line Gold card at a $5,000 credit limit, you could either transfer $5,000 of Bank A’s debt to MBNA and get 0.00% for 6 months, or do a cash advance / deposit an access cheque into the same Bank A account and pay the same 0.00% rate. Before you get started however, it’s smart to call the bank you’re thinking about borrowing from, and to ensure that they can do both balance transfers and advances. Best of luck!

Ron says:

So say I have 0% for 12 months for balance transfer. Theoretically I only have to pay that off at the end on my last statement.

Then I make a regular purchase at 19.99%. Say 300$.

When the monthly statement is due, I pay 300$.

What happens then?

GreedyRates says:

Hi Ron,

Let’s say your 0% for 12 month balance transfer had a $1,000 balance, and you then made a $300 purchase. When your statement was due, your repayment would be allocated approximately as follows (depending on how they allocate minimum payments):

1. $231 dollars would go towards paying down your $1,000 0% balance ($1,000/$1,300 total balance = 77%)
2. $69 would go towards paying down your $300 purchases at 19.99% APR ($300/$1,300 total balance = 23%)

This would leave you with:
1. a $769 balance at 0%
2. a $231 balance at 19.99%

Hope that helps,

GreedyRates Staff

Ron says:

Hi GR Staff,

OK so basically I have no say in what my payment goes towards.
If I want 0% towards BT and 100% towards purchases, to avoid any interests, I cannot.
The only way is to pay off everything immediately once you’ve made that purchase.
So best to avoid purchases all together and stick to BT only with this card.

Thanks for your answer.

GreedyRates says:

Hi Ron,

Exactly right. If you want to self-direct your payments to different balances at different rates, keep each one on a separate card.

GreedyRates Staff

Rob says:

Quick question:
I have a situation like this: I transferred my old balance ($2000) to a credit card (promo rate only 0%, and the transaction fee is 2%). Lets say the starting balance of this credit is 0, and I will never use the new card to purchase. The new transaction fee will be 40 bucks. A month later, I saw an interest charge of purchase on my card, which is obviously the interest charge (19.99%) of the transaction fee ($40). In order to get rid of this small interest charge, I will have to pay off the entire balance (2000+40), since my payment will always be applied proportionally. Is this interest charge can be avoided?

The GreedyRates Team says:

Hey Rob,

Thanks for the thorough comment. We read the Terms and Conditions for MBNA and discovered that the bank does the following: “We will allocate your payment towards paying off amounts that are charged at higher interest rates before those that are charged at lower interest rates…” This means that if the balance transfer fee is indeed charged at the 19.99% rate instead of the promotional 0.00% rate, then it would be paid off first using your payments rather than last. We also thought that they’d pay off the highest balance first, but it makes more sense to pay the higher rates first. In this case, we imagine that the fee is still accruing interest because you’ve only been making minimum payments so far, so next month be sure to cover the fee with your payment and check your statement afterwards to confirm it’s gone. Call MBNA to confirm and request assistance if you see that the issue persists.