The ABC Of Credit Card Balance Transfer

If your spend on the credit card has gone beyond your control and you are wallowing neck deep in debt, the one thing you can possibly consider is a credit card balance transfer. Here’s what you need to know about credit card balance transfers.

What is a credit card balance transfer?
This is the facility given to a credit card holder to switch his unpaid outstanding balance on a new credit card at a better rate of interest. The motivation behind a credit card balance transfer is to reduce one’s debt burden.

How does it work?
Say you have used your credit card A to make a purchase of Rs 50,000 and are unable to pay off the outstanding when the statement arrives. You therefore opt for an entirely new card, Card B that offers you a “balance transfer” option. Credit card issuer B also offers you a 0% rate of interest. This is an offer valid for a minimum of 90 days and it charges you a processing fee for the same (ranges from 1-3% of the amount being transferred). You receive a cheque from bank B and deposit it in bank A to clear your outsanding dues. After the processing in Bank A is complete, your balance is transferred to Bank B and you get a period of 90 days to clear your outstanding amount. The thing to bear in mind that this waiver on the new card is only temporary and you can only benefit from it if you pay off this outstanding within the specified time frame.

How to reap the benefits of a balance transfer
As we mentioned earlier, a credit card balance transfer relieves you temporarily from you debt burden. This is the primary reason to seek a balance transfer. You may also consider a balance transfer, if you are not satisfied with the service level of your current card user and are looking for better interest rates or want to make the best use of any exciting offer that comes your ways like an interest free credit window. A new card may also be giving you a higher limit, better rewards system or easier repayment terms.

How to select the best card for a transfer?
Needless to say, you have credit card issuers chasing you everyday, and the temptation to switch to a new card is plenty. This is specially true if your debt burden has gone out of hand. But do remember that you should not jump at the first offer that comes your way. Find the righ card to transfer your balance to. This will require a good amount of research and comparisons on your part. The things to check out are interest rates, the limit of credit and the fees. You can use one the web aggregators for help. This will help you choose the best offer and make the choice that is right for you.

A credit card balance transfer can be immensely useful as we have pointed out, but a wrong balance transfer may beat the very purpose of the transfer itself. You do not want to get yourself locked in a high interest rate or pay a hefty processing fee. Also once the transfer is complete, pay back your outstanding amount as soon as you can. The key to using a credit card is to be responsible. Further reckless use of your credit card may lead to a poor CIBIL score. A poor CIBIL score, as you probably know by now, spells trouble and may mar your chances of getting access to credit.



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