Credit card balance transfer: Credit card balance transfer allows any person to transfer the balance from their old credit card to a new credit card. This system is available with good terms and interest rates. Some other organizations will cut balance transfer fees. Usually the money transfer fee will be 3-5%. Firms also offer a tenure of around six to 18 months. In this case no interest rate will be charged on the amount transferred. So it is very important to know before doing credit card balance transfer.
Credit cards are generally used for easy transactions and managing your expenses. Many users use this card to fulfill their daily needs easily. Many times credit card users face a situation where they have to transfer their outstanding balances from one card to another. This type of practice comes under the category of ‘credit card balance transfer’.
What is a credit card balance transfer?
The ‘Balance Transfer’ facility allows the credit card user to transfer his balance from one credit card to another credit card. In this process, the user usually sees a balance transfer from a high interest rate credit card to a new credit card with a lower interest rate or better repayment terms. By doing so, credit card users can potentially save money on interest payments and streamline their debt repayment strategy.
Many banks and financial institutions offer balance transfer facility to their credit card users. For this, the availability and conditions may differ in different financial institutions. In such a situation, the special service of the credit card issuing bank or financial institution should be informed about the ‘Balance Transfer’ policy and related charges.
How does ‘Balance Transfer’ work?
To initiate a balance transfer, users usually need to apply for a new credit card. After getting the approval, the user can request a balance transfer from their existing credit card to another i.e. new card. By doing so the bank settles the outstanding amount with the previous credit card issuer and effectively transfers the debt to the new card.
By switching to credit cards with lower interest rates, users can lower their overall cost of debt. However, before doing so, it is important to note that the new credit card provider may charge processing fees or other charges for the balance transfer facility. In such a situation, these charges should be understood carefully to save money.
Adil Shetty, CEO, Bankbazaar.com, says the fees and charges associated with the balance transfer facility should be evaluated. Some credit card providers charge a balance transfer fee, which is usually a percentage of the amount transferred. In such a situation, understand whether the potential interest savings outweigh these charges. Apart from this, any kind of annual fee or other charges associated with a new credit card should be carefully understood. In fact these can affect the overall cost effectiveness of the transfer.
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