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Home » Credit Card Balance Transfer: How to Clear the Debts You Have While Saving on Interest

Credit Card Balance Transfer: How to Clear the Debts You Have While Saving on Interest

Whenever you’re having trouble managing your debt, a credit card with a balance transfer feature may be able to help. In specific conditions, balance transfer credit cards may assist you in saving considerably on interest payments. Additionally, these have the potential to make repaying a loan easier and assist you in paying off debt more quickly than you would with a different thing.

Debt transfer credit cards are not for everyone; therefore, it’s crucial to understand what they are and how they function.

First, you have to understand what credit card balance transfer means.

Whenever you consider doing a credit card balance transfer, you must initially understand what it entails. To clarify it simply, the transfer of balances on credit cards implies transferring the sum of money owed on a specific card to another. It usually ends with you repaying the first card while still owing the same amount on another credit card. Perhaps one of the primary explanations as to why a person might consider a balance transfer is that another card has lower rates of interest, making it less costly to cover it back with that card.

The Key Highlights

A credit card balance transfer transfers the remaining debts from a couple of credit cards to a single new card, usually with a cheaper interest rate.

Most debt transfer credit cards have a lower or 0% initial APR, which allows you to reduce your spending on interest costs.

Credit card balance transfer and how to do it?

Credit card debt transfers are the best way to pay off large, outstanding credit card payments. Anyway, transferring a balance from one credit card to another makes logical sense just in case the banking institution to whom you want to transfer your balance offers more profitable interest rates than the first credit card with which you have outstanding balances.

The most significant aspect of a credit card transferring a balance is the reality that you are limited to transferring a certain sum to a fresh credit card that is under its credit limits. Therefore, if another credit card offers a spending limit of Rs. 50K, and your outstanding dues with the preceding credit card are Rs. 75K, you are limited to transferring Rs. 50K to the newly issued credit card.

Different financial institutions provide forms to help customers apply for the card’s balance transfer purpose. The details listed below must be presented when asking for a credit card balance transfer.

  • Credit limit and card expiration date
  • Remaining credit amount
  • Credit card number

Most financial institutions ask for a few pieces of documentation before accepting credit card transfer of balance requests.

  • Photocopies of credit cards
  • Last 3–6 credit card bill statements.
  • Proof of address

Perhaps the most lucrative aspect of a credit card debt transfer is that the whole outstanding balance gets reimbursed using a demand draft presented by the fresh credit card issuer to your previous credit card. This relieves you of the strain of paying additional charges for interest on your credit card’s outstanding bill.

Your freshly issued credit card is going to determine how much interest you have to pay. As a whole, the amount of interest payable to use the credit card balance transferring option is lower than what financial institutions levy on credit card outstanding balances. Yet, the lower interest rate is only in effect for a limited time before returning to conventional interest rates.

This means that it is of the utmost importance to repay your credit to the newly issued credit card organization within the time frame specified to prevent high-interest rates.

The Most Significant Advantages of Credit Card Balance Transfers

Credit card balance transfers are a common and useful function of credit cards. This alternative assists customers in breaking free from revolving debt cycles that continue to worsen as interest rates mount. Let’s take a look at a couple of the most notable perks of credit card balance transfers.

  • It helps you reduce the additional interest that you are ultimately spending because of accumulation and unpaid credit card bills.
  • In comparison to other methods of repaying credit, this is a more straightforward way of getting rid of built-up debts from credit cards.
  • Speedy approval for balance transfers makes it simple for consumers to obtain and pay off their unpaid payments.
  • Your credit card transfer of balances feature allows you to move your debts from any or all of your cards.
  • Users are allowed an extension of time to pay down their remaining balances. The duration of this period features a zero or extremely low rate of interest.

If you decide to engage in a balance transfer, you must maintain a few factors in mental clarity. The primary issue is that certain financial institutions will only provide this service if the recently transferred balance is for a credit card that wasn’t issued by them as well. The majority of banking institutions have no restrictions on the types of cards that can be used for transferring balances.

Additionally, there might be additional limitations on the lowest and highest sums that are allowed to be transferred.

Credit card balance transfers often provide the following perks additionally:

These include

  • Transfer cards allow you to move your outstanding balance from a specific card with a higher interest rate to another with a lower interest rate, allowing you to manage your debt more effectively.
  • Balance transfer is one of the simplest strategies for helping you lower your financial obligations in an extremely effortless way. All you have to do is identify a credit card issuer who will conveniently present you with a credit card with beneficial parameters.
  • If it seems that you are in debt because you used numerous credit cards at the same time and acquired an extremely significant debt on all of them, transferring that balance to another card could be the solution. You may transfer the outstanding balances of all of your credit cards to the new one at once, taking advantage of cheaper rates of interest and penalties.
  • Moving the outstanding balance to the newly issued card is capable of offering you a couple of additional buffer times to handle late fees and other expenses imposed by your current credit card operator. This can considerably reduce your financial and mental stress.

Should you go for the credit card transfer of balances option?

When you are in a difficult monetary situation, are responsible for a high-interest unpaid sum, or are saddled with numerous credit card debts, it is an excellent option to decide on a lower-interest balance transfer. You need to think about the amount of money you would save on processing costs along with additional costs if you switched the balance transfer option for your credit card debts.

Just before starting, ensure that you save money after completing the whole fee, which encompasses processing expenses, the transfer of balances, interest, and any extra costs. It is critical to conduct an assessment of costs and benefits when asking for a credit card debt transfer to maintain profitability.

The simplest approach to accomplishing this is to conduct online studies to identify the best lenders offering credit card balance transfer services. Hence, if you’re wondering how to switch the balance on your credit card, don’t panic. Moving the balance on your credit card is a swift and simple affair that may be completed through the web.

The table given below shows the interest rates and processing fees charged by different common credit card providers.

Credit Card IssuerInterest RateProcessing Charge
HDFC BankAs per the Bank’s Policy1% of the Balance Transfer Amount/ Min. Rs. 250
AXIS Bank12% p.a.1.5% on the Balance Transfer amount/ Min.Rs.250
ICICI BankAs per Bank’s PolicyAs per Bank’s Policy
KOTAK Bank0% interest option available

Rest depends on the Bank’s Policy

Rs. 349/Rs. 10,000 BT Amount
RBL Bank0% Interest option available

Starting from 11.73% p.a.

  • 2.99%/ Min. Rs. 750 for 3-month option
  • Rs. 499 for 6 & 12 month option
SBI0% Interest option available

Starting from 9% p.a.

Zero processing for certain plans.

Rest will be discussed during the application.

Everything You Should Know Just Before the Transfer of Your Credit Card Balance

Transfers of balances are commonly used for managing debts. However, as with any other financial tool, they carry both risks and gains.

  • Credit scores can influence your APR. Lending institutions may evaluate your credit ratings when calculating the APR for the balance transfer card. Several cards offer the lowest possible rates to individuals with satisfactory, very good, or outstanding credit ratings.
  • Balance transfer costs might accumulate. A large number of credit card providers levy balance transfer charges, which range from 3% to 5% of the sum that is transferred. Bear these expense considerations in mind when thinking about a balance transfer.
  • Low-starting APRs are just short-term. Introductory APRs fluctuate from card to card, although they typically range from 12 to 21 months. Prepare yourself for the rate of interest to rise, along with an attempt to make the most of the inexpensive introductory APR by covering more of your financial obligations during this period. APRs for debt transfer credit cards after the introductory period can vary, as determined by your credit score.

The positive and negative aspects of credit card balance transfers

Credit card balance transfers might help certain individuals manage debt with elevated interest rates. On the other hand, activating any credit card, as well as managing debt, carries a few risks.

For Your Information, Check the Table of Pros and Cons

  1. Usually, it reduces the amount of interest paid. A few balance-transferring credit cards offer introductory rates starting as low as 0%. Even though these sorts of rates are usually short-term, they offer a chance to cut down on interest expenses.
  1. Frequently demands a high credit score. Without solid credit, you are unlikely to be able to get the most favourable rates of interest on your credit card balance transfer. When you are unable to obtain a low rate, the overall expense of the card may exceed your expected savings.
  1. May speed up the repayment of debts. By choosing to utilize your interest-based savings to pay back the outstanding balance, you could be able to speed up the debt payback procedure.
2. There may be hefty charges for transferring. Usually, several balance transfer credit cards carry a fee of 3% to 5% of the amount transferred. In certain circumstances, these expenses can negate any prospective savings.
  1. Offers the ability to increase your credit score. When used carefully, a debt-transferring credit card may boost the credit scores you have. For instance, you might find yourself able to lower the amount of debt you have while also improving your credit utilization ratio, both of which benefit your score on the credit report.
3. Low rates of interest are usually short-term in nature. Low-interest rates on balance transfers of credit cards may help you recover up on your debt payments, whereas these APRs rarely stay long. When you are struggling to pay off your loan in advance, and the introductory rate comes to an end, you might face high interest costs, which can deplete your projected savings.
  1. The credit scores you have may be damaged for a while. Asking for a credit card balance transfer will most likely result in a standard credit check, commonly referred to as a hard inquiry. Hard queries on credit history reports may cause your score on the credit report to drop momentarily.

Is it wiser to transfer the balance or pay it off?

Paying down credit card bills might help you save money monthly while also perhaps boosting your credit score. On the other hand, if you are incapable of paying off the debts completely at once, a balance transfer may allow you to avoid spending money on interest charges. This is contingent upon your ability to cover all of the outstanding transfers before the introductory interest rate comes to an end.

Bottom Line

Whether you’re thinking about getting a debt transfer credit card, check your alternatives thoroughly because the terms and conditions for every single card may vary. For example, numerous balance transfer credit cards feature longer introductory APR phases, whereas certain others have lower introductory terms but waive high charges for transfers.

After reading the terms and conditions, doing the calculations before submitting applications, and developing a realistic payback plan, taking full advantage of a 0% introductory APR offer on a fresh card could be a wise decision. As long as you conduct your homework, you shouldn’t have any issues choosing the best balance-transferring card for you.

Once you determine that a card with a balance transfer feature is the best option for you, look into the rules thoroughly and try to pay off whatever debt is practicable before the limited-time interest rate ends. Following these and other appropriate credit card management activities may assist you in better managing your debt.

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