An online credit card is a great way to manage your finances during a cash crunch. It gives access to a credit limit which you can use to purchases goods and services without worrying about not having cash. It comes with a host of features and benefits, such as rewards, cashback, bonuses, etc.
It may be the best way to manage your finances, but if you do not use it wisely, you will eventually end up in a debt you cannot afford to repay. . However, if you have pending dues coupled with compounding interest rates, it is best to opt for a balance transfer from your credit card. It enables you to reduce your stress and enhance your money management abilities.
So, What Is a Credit Card Balance Transfer?
A credit card balance is a facility provided by your issuing bank to transfer the balance amount on your credit card to another one. Generally, it is an ideal option to go for when you have a significant amount of outstanding dues on your credit card with high-interest rates. In such cases, transferring your outstanding dues to another financial institution that offers better rates may be wise. The best part is that you can clear off your outstanding balances and reduce your interest charges in one go.
Here are the top features of an online credit card balance transfer:
- It enables you to avoid higher interest rates and buying time.
- It is a great financial management tool that allows you to transfer all pending dues to one credit card.
- You can avail of additional benefits, such as discounts on air tickets, dining, hotel stays, etc.
- It enables you to maintain a healthy credit score by ensuring consistent payments of your credit card bills.
How Does a Credit Card Balance Transfer Work?
Although a credit card balance transfer is the best way to reduce your financial burden, you should opt for this option only if the credit card you are transferring your outstanding dues has lucrative offers. For instance, you will need to check if you can avail of a 0% APR for at least 12 months.
It is worth noting that the amount you can transfer to another credit card depends on your credit limit. For example, your new credit card limit is Rs. 100,000/- and your pending dues from your previous online credit card are Rs. 150,000/-, then you can only transfer Rs. 100,000/- under the balance transfer option.
To make a credit card balance transfer, you need to provide your credit card issuer with information, such as credit limit, expiry date, outstanding credit amount, and credit card number. You will also need to submit copies of your credit card, credit card bill statements (last 3-6), and address proof.
When you make a balance transfer from a credit card, the entire outstanding amount gets paid in the form of a demand draft issued by your new credit card issuer. Your new credit card issuer will decide the interest rate you will have to pay, which is generally less than your previous ones. It is worth noting that you can avail of these benefits for a specific time decided by your issuer. After that, the standard interest rates apply. Hence, it is crucial to pay your credit card bills on time and in full to avoid interest charges and other penalties.
Things To Know While Making a Credit Card Balance Transfer
- A credit card balance transfer will significantly reduce your credit limit. For instance, if your credit limit is Rs. 100,000 and you have a transfer of Rs. 50,000 to your new credit card, then your credit limit remains at Rs. 50,000/-.
- If you want to avoid paying high-interest rates, make sure to pay your credit card bills within the interest-free period offered by your new credit card issuer.
- Keep in mind that you will not be able to avail of lower interest rates on new purchases made on your new credit card. New transactions will fall under standard rates.
- You can opt for an online credit card balance transfer if you have been a credit card holder for a minimum of one year.
- If you have a remaining credit after transferring your credit card balances, it would be wise not to use your card until all dues are cleared.
While applying for a credit card balance transfer, it is worth noting that you can not transfer the outstanding balance between credit cards from the same credit card issuer. It means that the credit card you are transferring your outstanding dues to must be from another credit card issuer.