Balance - Transfer

What is Balance Transfer ?

A balance transfer is a process where part or all of the outstanding debit balance (or debts), a cardholder owe to another lender, is transferred from one credit card to another. Credit card balance transfers are usually done by the cardholders who want to move the amount they owe to a credit card with a lower rate of interest, less penalties, extended time period to repay the dues and benefits such as reward points or travel miles.

A credit card balance transfer helps to pay-off the outstanding balance sooner, by decreasing the overall cost of what the customer owes. Transferring high interest balances to a card which offers a promotional lower interest rate will enable to save money on interest repayments. It can be a good way to keep track of the user’s balance and payments with every detail in one place.

The credit card companies offer free balance transfers in order to attract people to select their products over a competitors’. Along with this, they also offer an introductory period from 6 to 21 months where no interest is charges on the transferred amount. This helps the customer to save even more and payoff the balance faster if it is settled during the initial interest-free period.

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Advantage of Balance Transfer

Avail Better Interest Rates: The credit cards issuing banks or financial institutions offers great deal and discounts to the customers in the initial few months of getting a card. Once this period passes, the interest rates becomes higher than the ones offered by others in the market. With this balance transfer system, a user can shift the amount to another credit card that is offering a better interest rate. Get Buffer Time: After the credit card balance transfers, the bank allows it customers to have an initial buffer period to pay-off their debts with zero or minimal interest rates. This becomes an easy option for the cardholders as they do not have to pay-off huge interest along with the outstanding amount. Simplify Finances: Multiple credit cards might lead to loss of track of the credit card bills to be paid on time. This results in piling up of the bills and create a hole in the budget and credit score of the user. This can be solved if the user considers combining the balances from all cards to one card which offers lower rate of interest and collectively pay-off all the bills. This is cost-effective and saves a lot of time. Receive Immediate Relief: Credit card buffer transfer is a quick and easy process which allows a buffer time to its customers to clear all the debts with zero or nominal interest rates. This ultimately results in immediate relief of stress because of the previously pilling up of bills. The new credit card company pays off the old credit card debt by issuing a Demand Draft. Avail Better Offers: The credit card issuing banks might not offer best terms of fees, extended grace period, etc. after the first year. So, by availing the balance transfer facility to a bank offering better offers, the user can manage their finances properly without paying some extra charges.

Disadvantage of Balance Transfer

  • Hurts Credit Score: If a cardholder does frequent credit card balance transfer or have a credit card due balance above 30% of the credit limit, then the credit card score might get decreased. It is important to maintain a good credit score to make sure that the user is eligible for balance transfer.
  • Gets Expensive: It is very necessary to find out if the balance transfer is actually worth considering or not. This is because most people get enticed by the minimal interest rate when they consider for a credit card balance transfer and forget to pay attention to the processing fees which comes along the balance transfer
  • Increases Risk of Debt: Credit card balance transfer may end up with a higher credit limit and this results in racking up more debts than the user initially started out with.

Banks allowing Balance Transfer

Some of the top banks in India offer balance transfer facility. Some banks allow customers to transfer balances up to Rs.5 lakh and offer nominal interest rates for up to 6 months before the interest rate associated with new card are charged. Here is a list of banks that offers credit card balance transfer services at attracted rates.

BankRate of Interest (per month)Processing FeeApplicable Period for Lower Interest Rate
Axis Bank0%1% or Rs.199 (whichever is higher)3 months
State Bank of India0% – 1.7%

2% or Rs.199, (For 60 days), whichever is higher

Zero (for 6 months)

60 days – 6 months
Kotak Mahindra Bank0%Rs.349 per Rs.10,000NA
HSBC Bank0.99% (3-12 months), 1.25% (18-24 months)1% (minimum Rs.149)3, 6, 9, 12 months
Standard Chartered Bank0.99%NA6 months
Punjab National Bank0.99%Rs.172 or more6 months

Balance Transfer Frequently Asked Questions (FAQs)

Your age and your income are the primary criteria for the bank to decide your credit eligibility. For instance, a bank would be more willing to a younger person, earning a stable monthly salary. Such profiles have lower risk exposure.

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