If I say you can transfer your credit card balance to another banking or financial institution that has a lower interest rate or no interest at all for a certain period of time, you might be surprised how this is possible? Yes, it is possible. That’s how the concept of balance transfer came into existence. In this post, you will learn What is a Balance Transfer in Credit Card | How does Credit Card Balance Transfers Work in-depth?
We will discuss each aspect of the credit card balance transfer process in detail. you just need to go through this article completely.
Let’s start with the basics to understand the topic in a better way…
What is Balance Transfer?
A balance transfer allows you to move your debts such as credit card balances, student loans, home loan medical bills, car loans to a zero or lower interest rate credit card for a promotional or limited period to the other banks or financial institutions.
In simple terms, if you have a notable outstanding balance or dues on your present credit card and you are paying high interest on that amount as well, you can think of balance transfer as an option and transfer the pending dues to other financial institutions that offer you a lower rate of interest.
I hope you got a fair idea about balance transfer. let’s see it in the terms of Credit cards.
What is a Balance Transfer in Credit Card?
As the name suggests, the transfer of outstanding credit balances from the present credit card, to a different bank card, that has lower rates of interest is referred to as balance transfer in credit card.
Many credit card companies chuck balance transfer fees ( i.e 3%–5% of the transfer amount) to attract cardholders. In some cases like promotional or introductory offers, no interest is charged for a period of six to about 18 months on the transferred amount.
The offer solely depends on the bank and financial institutions as per their terms and conditions.
Features and Benefits of Credit Card Balance Transfer
A credit card balance transfer is helpful for those who have significant credit card dues and are facing issues in repayment. find below some of the great benefits of credit card balance transfer.
- It helps you to save the high interest that you are currently paying to the bank or an financial institutions.
- You might get an offer where you do not need to pay interest at all for a certain period of time.
- Using this facility one can tranfer the dues or balances of one or more credit card.
- Banks are providing an easy and online way to avail the credit card balance transfer facility. you do not have to visit the bank branch.
- You will get the duration generally between 3 months to 48 months to pay the entire outstanding balances with low interest rate. It can vary from bank to bank.
Eligibility for Credit Card Balance Transfer
Customers who have a good track record with respect to their credit card spend, transaction pattern, and payment history becomes eligible for a balance transfer on a credit card depending on the internal policies of the bank.
Also, your credit card score must be above 650 depends on the bank.
Modes of Fund Transfer
Funds would be transferred via NEFT or Demand Draft. For NEFT, the customer can send an e-mail to the new bank with the previous bank name, the customer’s name as per previous bank details, and the previous bank credit card number from which the balance transfer is to be taken.
List of Credit Cards Banks that Offer Balance Transfer
Find the list of the major banks that offer credit card balance transfer facilities below.
- State Bank of India (SBI)
- ICICI Bank
- Kotak Mahindra Bank
- Axis Bank
- Standard Chartered Bank
Important Points to Remember before doing Credit Card Balance Transfer
You must know the below important points before initiating a credit card balance transfer.
- There wil be a processing fee ranging generally between 1% to 2% depends on the bank.
- You must know that the lower interest rate is not forever. It varies generally between 3 months to 24 months depeds on your card dues and the bank. within the given stipulated time you have pay the entire dues.
- Balances cannot be transferred between cards with the same bank.
- You can book balance transfer for a minimum amount of ₹ 5,000 to a maximum of 75% of your available credit limit of the new card. It varies from bank to bank. you will come to know the limit at the time of balance transfer.
- The lower interest rate is only for the outstanding amount or dues on the card not for the new purchases that you make on your credit card. These transactions fall under standard interest rates.
- Balance transfer facility is generally offered to customers who have been a credit card user for one particular company for at least a year.
How does Credit Card Balance Transfers Work?
There can be various processes varies from bank to bank to initiate a balance transfer. however, you can find below the common process for all.
Apply for a New Card:-
To get the best offer from the bank or financial institution you must have a good credit card score ( at least 700 or more than that).
Transfer of credit card balance makes sense only when the bank that you are transferring your outstanding balance, offers rates that are more attractive than the original credit card company on which you have pending dues.
you have to pay the processing fee for the balance transfer .so before proceeding with a balance transfer calculate how much money you will save it.
your total savings must be more than the processing fee and additional costs that may involve in the balance transfer process. you can check with the bank as well regarding this.
Also, you must check your new card limit before proceeding with balance transfer as you can transfer only that amount to your new credit card which is within its credit limit.
For example- if your new credit card has a limit of Rs. 85000 and your pending dues from your previous credit card are Rs.100000 then only Rs. 85000 can be transferred to the new credit card under the balance transfer scheme.
Required Information and Documents
You need to provide the below information and documents to the bank you wish to transfer your balance to.
- Credit card number
- Credit Limit
- Expiry date of the credit card
- Outstanding credit amount
- Last 3-6 credit card bill statements
- Address proof
NOTE: Generally the interest charged to avail credit card balance transfer facility is less than the interest charged by banks on credit card pending bills.
How to do a Credit Card Balance Transfer?
After you calculate the total savings on your credit card balance transfer to a new bank if you satisfy, you can proceed with it. make sure you have the above documents and information ready with you.
Follow the steps below to proceed.
- Go through your total outstanding dues, interest rate and other charges. calculate and keep it with yourself.
- Look for a credit card from the bank or institutions that offers a lower interest rate than the previous one.
- Make sure the new Credit card limit is sufficient so that you can carry all your outstanding dues.
- Ask the new bank about all the fees or charges associated with the balance transfer facility. if you feel its less and convenient than the previous one, go for it.
- Apply for a new credit card with the selected bank.
- Request the new bank to transfer all your credit card dues to your new credit card.
- After the dues are transferred, clear them within a given period of time.
Fee & Charges
The transaction fee and the processing fee may be applied while doing a fund transfer. it can vary between 1% – 5% depending on the bank. Make sure you check with the bank before initiating a balance transfer.
In this article, you have learned What is a Balance Transfer in Credit Card | How does Credit Card Balance Transfer Work.
I hope you are clear with the concept of the credit card balance transfer process. you can use this facility if you have significant dues on your credit card. however, make sure to select the bank that has a lower interest rate than the current one.
If you have any doubts/queries related to the information you can ask in the below comment section. I will try my best to answer them.
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a. Go through your total outstanding dues, interest rate, and other charges. calculate and keep it with yourself.
b. Look for a credit card from a bank or institution that offers a lower interest rate than the previous one.
c. Make sure the new Credit card limit is sufficient so that you can carry all your outstanding dues.
d. Ask the new bank about all the fees or charges associated with the balance transfer facility. if you feel it’s less and convenient than the previous one go for it.
e. Apply for a new credit card with the selected bank.
f. Request the new bank to transfer all your credit card dues to your new credit card.
After the dues are transferred, clear them within a given period of time.
It may take 48 to 72 hours if you fulfill the bank requirements.
your cheque will be delivered in 3 to 7 working days.