Credit Card Balance Transfer: Credit cards are generally used to make easy transactions and manage your expenses. Many users also use credit cards to easily fulfill all their daily needs. Many times credit card users face a situation where they have to transfer their outstanding balances from one card to another. This type of practice comes under the category of 'Credit Card Balance Transfer'.
What is credit card balance transfer?
The 'Balance Transfer' facility enables a credit card user to transfer his outstanding amount from one credit card to another. This process usually sees the user transferring the outstanding amount from a high-interest rate credit card to a new credit card with a lower interest rate or better repayment terms. By doing this, credit card users can potentially save money on interest payments and also streamline their debt repayment strategy.
Many banks and financial institutions offer balance transfer facility to their credit card users. Availability and conditions for this may vary in different financial institutions. In such a situation, one should get information about the special service 'balance transfer' policy of the credit card issuing bank or financial institutions and the charges related to it.
How does 'Balance Transfer' work?
To initiate the balance transfer, the user usually has to apply for a new credit card. After getting approval, users can request to transfer the balance from their existing credit card to another i.e. new card. By doing this the bank will settle the outstanding amount with the previous credit card issuer and then effectively transfer the debt to the new card.
By switching to credit cards with lower interest rates, users can reduce their overall cost of debt. However, before doing so, it is important to keep in mind that processing fees or other fees may be imposed by the new credit card provider for the convenience of balance transfer. In such a situation, one should carefully understand these charges so that money can be saved.
The fees and charges related to the balance transfer facility must be assessed. Some credit card providers charge balance transfer fees, which are usually a percentage of the amount transferred. In such a situation, understand whether the potential interest saving is more than these fees. Apart from this, any kind of annual charge or other fees associated with the new credit card should be carefully understood. In fact, these may affect the overall cost-effectiveness of the transfer.
