It has been observed that with increasing costs, there is a sharp rise in credit card usage. By the end of June 2022, there has been about a 7% increase in card utilisation when compared to the previous year. However, due to this, individuals often find it difficult to repay their card bill on time.
So, to ease the repayment process, several financial institutions have introduced credit card balance transfer facilities. Keep reading to get a clear idea of how it works and how this facility can benefit you.
How Does Credit Card Balance Transfer Function?
The process of a card balance transfer is as follows:
Step 1: Determine the outstanding due, penalty charges and interest rates on your current card.
Step 2: Browse through various cards to select the one that charges a lower interest rate.
Step 3: Find out the limit of this card to determine if it is sufficient to pay the outstanding dues of your current card.
Step 4: Calculate the additional charges that you will need to pay when you apply for credit card.
Step 5: Once done, submit the card balance transfer application form at your bank.
As soon as you complete the process, the money from your new credit card will get transferred to the current credit card such that all the dues will get cleared. Then you will have to repay the credit on your new card. There are several advantages associated with the balance transfer process that you can benefit from.
What Are the Benefits of Balance Transfer from Credit Card?
The benefits associated with a balance transfer from a credit card are as follows:
- Ease of application: The process of application of this facility is easy and can be done in a few hassle-free steps. Thus, you will not have to seek additional help while filling up the form and simultaneously minimise the chances of errors during the process.
- Quick processing time: The processing time of balance transfer is comparatively quicker. It might take only a few days for the completion of this process. However, you should note that this time varies considerably among different financial institutions.
- Lower interest rate: The interest rate of the new credit card is comparatively lower. Hence, EMI payment would not pose an additional financial burden. Moreover, you can save sufficiently on the compounding interest that keeps accumulating on your present credit card.
- Improvement in credit score: This process does not hamper your credit score in any way. Also, with the reduction in EMI, it becomes comparatively easier to pay off the credit on time. Thus, within some time, you will be able to notice a prominent increase in your CIBIL score.
- Availability of grace periods: When you opt for a balance transfer, there are times when you can get additional time to repay the amount. This is beneficial, as the chances of missing out on EMI dates reduce, and you can get sufficient time to repay the credit at ease.
However, before applying for a balance transfer, it becomes imperative to check if you are eligible for it.
Who Can Opt for Credit Card Balance Transfer?
Any cardholder with substantial outstanding dues can opt for a credit card balance transfer to suit their need. However, different banks have set various eligibility criteria, based on which they decide to approve the application. However, to project yourself as an eligible candidate for this process, you can take some measures. These are as follows:
- Make sure to pay the EMIs of your loans on time.
- Try to establish a healthy relationship with your bank.
- Check your credit score periodically, and try to improve the same.
Once you get selected for a balance transfer, the procedure will get completed quickly.
How to Apply for Credit Card Balance Transfer?
You can follow various methods to apply for a credit card balance transfer:
- Online method: Visit the official website of a financial institution. Submit a detailed request stating your need for a balance transfer.
- Offline method: Visit the physical branch of your bank. There submit a detailed request for availing this facility.
- Other methods: You can also call credit card customer care services for achieving this purpose.
If your bank determines that you are a suitable candidate, you can immediately receive approval. Thus the pending dues on your card can get cleared immediately.
What Are the Fees & Charges on Balance Transfer from Credit Card?
The different fees associated with this transfer process are as follows:
- Interest rate: Several financial institutions provide a grace period during which you will not have to pay any interest on the amount. However, post this period you will have to pay interest at a fixed rate while repaying the amount.
- Processing fee: Various financial institutions have different processing fees that you will have to pay to complete the balance transfer procedure. This usually ranges between 1% and 3%. You can easily pay this money online using the NEFT facility available.
With a credit card balance transfer, individuals can easily repay their card dues on time. However, you should note that not all banks allow the transfer of balance to cards of the same bank. Hence, it becomes imperative to check with them before opting for this facility.