A credit card is the best and easiest way to access money when required. Payments through credit cards come with a host of benefits, such as reward points, fuel surcharge waivers, etc. However, while using a credit card to make payments, you will have to be smart to avoid ending up with massive debt. One of the best ways to avoid a debt trap is by opting for a credit balance transfer.
Before we move further, let us understand what a credit card balance transfer is.
Credit card balance transfer
It is a facility provided by different credit card issuers to transfer the balance amount of one of your credit cards to another one. People usually go for credit card balance transfers when they are compelled to higher interest rates for the debt amount on the credit card. Transferring the balance amount to another credit card seems to be a better option to clear off outstanding debts.
Features of Credit Card Balance Transfer
- Besides avoiding higher interest rates and buying time, it is a crucial tool for financial management. If you have multiple credit cards with different payment dates, you can transfer all pending payments under one credit card.
- It enables you to avail of additional incentives, such as discounts on air tickets, reward points, etc.
- Inconsistencies concerning EMI payment will result in lower credit scores. A lower credit score lowers the possibility of availing of a credit card balance transfer.
- It comes with additional features that include instant transfer, minimum documentation, etc.
How to transfer the balance from one credit card to another?
Making a balance transfer from a credit card is the best option to clear off your debts and pending bills. But, you should only opt for this option if the credit card you are transferring your balance to offers lucrative rates and benefits than the one on which you have pending dues.
It is worth noting that you can transfer the amount to your new credit card which is within the credit limit. For instance, your new credit card has a limit of Rs. 75000/- and your pending dues from your previous credit card are Rs. 100,000/-, then you can only transfer Rs. 75000/- under the credit card balance transfer scheme.
To make a balance transfer from a credit card, you will need to furnish the following information to your credit card issuer.
- Credit limit
- The expiry date of the credit card
- Outstanding credit amount
- Credit card number
You will need to furnish the following documents to the bank to avail of a credit card balance transfer:
- Copies of your credit card
- Credit card bill statements (last 3-6)
- Address proof
One of the crucial features of a credit card balance transfer is that your entire outstanding amount gets paid in the form of a demand draft issued by your new credit card issuer towards your old credit card. The interest rate you will have to pay will be decided by your new credit card issuer. Generally, the interest rate on your new card is less than your previous ones. However, you must keep in mind that this benefit is applicable for a specific time after which the standards interest rates apply. Therefore, it is imperative to pay your debt to your new credit card issuer within the set time to avoid paying hefty interest rates.
Crucial things to remember while making a credit card balance transfer
Regardless of how lucrative the rates and benefits of your new credit sound, it is crucial to know all aspects of a credit card balance transfer before opting for it. Here are some of the things that can significantly affect your decision while making a balance transfer:
- When you avail of a credit card balance transfer, it reduces your credit limit. For instance, if you have a credit limit of Rs. 100,000, and you have transferred a balance of Rs. 50,000/- to your new credit card. It means that you have a credit limit of Rs. 50,000/-
- If you wish to avoid paying hefty interest rates, it would be wise to pay off all your dues within the free and nominal interest rate period offered by your credit card issuer.
- You cannot avail of lower interest rates on new purchases that you make on your new credit card. New transactions fall under standard rates.
- You can avail of a credit card balance transfer if you have been a credit card user for a company for at least one year. It ensures that customers do not keep hopping from one credit card to another to avail themselves of lower interest rates.
