Credit Card Balance Transfer
Credit card bills can be burdensome if one is not able to pay them off timely. As soon the due date is crossed, the banks put the penalty in the form of rate of interest on the outstanding balance thereby increasing it by every day. This can be mentally drowning as the customers feel as if they are stuck in some debt trap. To jump out of such a worse scenario, the credit card user is left with two options. One is to take a personal loan and second is to opt for credit card balance transfer. Both these options let the users pay back the outstanding amount along with the interest in easy EMIs without feeling the burden of debt.
A personal loan may seem like a viable option where the banks and financial institutions often charge a rate of interest which is way lesser than the credit card delay payment interest rate . In layman language, it is like taking a better loan to pay off another loan. However, credit card balance transfer is another favourable option as it helps the user to switch to a bank offering lower interest rate and pay back the outstanding balance in easy and comfortable EMIs.
ADVANTAGES OF CREDIT CARD BALANCE TRANSFER
The various advantages of credit card balance transfer are:
- Get a better rate of interest: Many banks and financial institutions offer attractive deals, offers, discounts on credit card balance transfer for some initial time ranging from a few months to a year. The customers can make the most of this low-interest rate during the period and plan their finances around it. The banks tend to increase the rate of interest towards the end of these deals. With proper finance management, one can avail the total benefits of credit card balance transfer.
- Simplify finances: Sometimes in the mayhem of life, one tends to forget to pay off the credit card bills on time. This often results in piling up of interest and making the due amount humongous. This also hampers your credit score badly and weakens your credit avenues. If you have multiple credit cards, you can consolidate the credit card balances of all the cards into one card with the bank offering the lowest rate of interest. This is one economical way of avoiding penalties and saving on money and time.
- Avail better deals and offers: Usually, your present credit card provider is charging a decent amount as an annual fee, giving nil or short grace period. Herein you feel like trapped with your credit card issuer as there is no scope of better deals and offers which you can avail. However switching to a credit card issuer offering better deals in terms of an extended grace period, the low annual fee can help you in better financial position. Availing credit card balance transfer often comes with great initial deals which can be turned into one’s favour.
- Get buffer time: Buffer time is the grace period given by banks to the credit card holders to clear off their debts without any additional or nominal interest rate post switching with credit card balance transfer. This gives a big sigh of relief to the credit card holders as no heavy interest rate will be levied on the credit card outstanding amount.
- Get immediate relief from debt: Credit card balance transfer gives immediate relief to the credit card holders who cannot bear the burden of the outstanding amount due along with the piled up interest over it. The process of switching to a new credit card issuer is fast and the customer is given a buffer time during which he can clear his dues at zero or nominal rate of interest. Initially, the new credit card issuer also offers attractive discounts and deals. The customer gets immediate relief from debt as the new credit card issuer clears the outstanding amount either by drawing a Demand Draft or by transferring the balance in your previous credit card account.
DOWNSIDES OF CREDIT CARD BALANCE TRANSFER
The credit card balance transfer also has some downsides. These are:
- Credit score getting hampered: A credit card can be considered as a loan and failure to pay off the regular bill's results in your credit score getting affected for bad. If you have a poor credit history and bad CIBIL score, then you are not eligible for credit card balance transfer. If you go for credit card balance transfer frequently or your credit card balance is over 30% of the credit limit, then chances of credit score getting down are very high.
- May be expensive: Usually, people tend to make the switch from high-interest rate to the low-interest rate with credit card balance transfer but forget to take the processing charges and other charges into consideration. This usually results in the customer paying a lot more than he would if he hadn’t done credit card balance transfer. Thus, before proceeding, take all the factors into consideration and take a calculated decision.
- Increase the risk of debt: The credit limit of the credit card increases with credit card balance transfer. This lets you splurge more and pile on the debt even more than what you started with.
APPLYING FOR A CREDIT CARD BALANCE TRANSFER
Credit cardholders with good to excellent credit score and a decent financial history without any defaults can easily apply for credit card balance transfer. This gives assurance to the new credit card issuer that you won’t default. Thus, before making the switch, check if any previous credit card payment is unpaid and clear off the dues to avoid any pothole in the balance transfer process.
The process for applying for a credit card balance transfer is easy. The following things need to be kept in mind:
- There is no need for applying for a new credit card if your credit card has sufficient credit limit with the balance transfer facility. You can simply transfer the overdue balance to the new credit card.
- Always take the processing charges and any other hidden cost into consideration so that the credit card balance transfer is beneficial to you.
- One can apply online by putting details of the credit card number, outstanding amount and balance transfer tenure.
Once the application is approved, the new credit card issuer will clear off your credit card outstanding dues by drawing a cheque or Demand Draft in favour of your credit card account and draft new EMI for you which needs to be paid from the next month onwards.
Before you make the switch, ask your new credit card issuer for the best deals and discounts.