Credit Cards are merely not just plastic money any more, but offer you an array of credit facilities that make your life easier. One of these is the balance transfer facility which allows a card holder to clear his credit dues on one card by transferring them to another card. Let’s find out how this facility can be availed and whether it’s a suitable option for you.
What Is It?
Balance transfer facility available for select credit cards allows its holder to transfer a pending amount owed on one card to another card, provided the second card has a credit limit higher than the money owed.
Some premium card holders may not require any additional procedures or documentation to avail this facility but other cards may need to be supported with additional documents. These may be
- Credit card photocopies
- Last 3-6 credit card bill statements
- Address proof
Also banks do not mostly allow balance transfer to other cards issued by the same lender. Moreover, not all credit card holders can avail this facility even if they provide adequate documentation.
Should You Opt For It?
Although balance transfer is essentially moving debt from one card to the other, this option may help cardholders get out of circular debt cycles that keep growing worse due to compounding rates of interest. It is also a convenient way to get rid of accumulated credit card debt as compared to other means of paying back credit.
The process is quick which makes it easy for customers to avail and get rid of their pending dues and a buffer time is allocated to cardholders to pay off their outstanding amount. This period has zero or a very nominal rate of interest which you can find out from your bank before opting for the facility.
Things To Watch Out For
- While balance transfer is a convenient facility to use there are some key things to keep in mind when availing it.
- You can only transfer that amount to your new credit card which is within its credit limit
- One must be wary of processing fees. At times, the processing fees might be very high, making you shell out more than what you might have if you had continued with your existing card
- The lower interest rate for credit card balance is not applicable to new purchases as these transactions fall under standard interest rates offered by the credit card issuer
- Refrain from using your credit card until all balance transfer payments are paid and all subsequent charges are cleared
- Some lenders may offer an EMI mode of repaying your credit card balance when you opt for balance transfer. You need to check the interest rate as well as the terms and conditions and not blindly choose to do the transfer just because the option of instalments is being given.
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