Pros and Cons of Credit Card Balance Transfers

Credit card balance transfer is the process of transfer of outstanding amount that is due, from one credit card to another. Banks have been offering this option of credit transfer from another card at a lower interest rate to attract more customers. Nonetheless there are a lot of underlying factors to be looked at before considering this option. The low interest rate on remaining balance applies only for a limited period and there are various other clauses and conditions to be considered while going for this option, as discussed below.

If the current interest rate is much higher than the interest rate offered by the Bank to which you are considering to make a balance transfer to, then it is a wise option. If credit card balance transfer ensures a good rate of savings in terms of interest paid as well as taking into consideration other fees and charges such as processing fees and so on, it is a advantageous move. If the overall balance, once transferred, is being paid offer in the specified promotion period during which a low interest rate applies, it is a very rewarding option. But many people tend to be unable to manage their credit card purchases and thus end up having more debt. In turn they wouldn’t be able to pay off their outstanding in time. Most credit card companies consider this factor while offering the balance transfer option with low interests for a limited period after which higher interest rates are chargeable.

Customers should be careful not to buy new products and services using this new credit card since, only the amount which is transferred is liable to this deducted interest rate. New purchases do not have an interest free period. Infact, interest is charged from the first day of purchase. In order to benefit from the balance transfer to a new credit card, the customer has to keep in mind that they have to first finish off payment of the existing debt. Another factor to be considered is the processing fees. A one time processing fee is charged during the time of balance transfer , and if you are not careful with the amount charged this might reduce the benefits you aim to achieve through the process. Also while calculating interest charges, service tax that is applicable on interest charges have to be accounted for. High rate of interest on the credit card also means high service tax payable.

Carrying a large revolving debt has a negative impact on the overall credit score. The percentage of total debt to the total credit is considered while calculating credit score. Transferring balance to another credit card and adding on credit and again transferring it repeatedly is not a good option since it reflects badly on your credit score.

Balance transfer is a good option if it is managed carefully. It enables the customer to save on the interest paid out as well as helps to pay off the outstanding amount more quickly. But if the process is not handled with care, the customers might fall into a debt trap. Balance transfer should be made solely with the purpose of paying off debt and not for adding on to it in the meantime and care has to be taken of stretching expenses beyond income limit. 

Useful links:

Credit card offers 0 balance transfer 12 months

SBI Credit Card Balance Transfer Procedure

Balance transfer facility in HDFC Bank Credit Card

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SBI Credit Card Balance Transfer Procedure – Five steps to get stress free

No one enjoys the feeling of staring at credit card dues that need to be cleared and that too, with an added interest of up to 18%, which is the norm in most cases. Especially for a cash strapped consumer, the difference between paying the premium and the additional high rate of interest can change a manageable scenario into one that bites deeply into the pocket. As far as credit card companies go, deferring payment will only worsen the situation for the consumer. The best solution, in these circumstances is to transfer the balance to a more reliable bank, which also offers a lower rate of interest. 

Through the SBI Balance Transfer option, one can be assured of the fulfillment of both the criteria mentioned above.

As per the scheme, a customer may transfer the high rate credit card balances of other credit cards onto the SBI credit card, wherein the interest payable is as low as 0%, thus creating a circumstance of complete convenience.

The entire procedure is a matter of six steps, in case of a new user and just three steps in case of a customer already registered on the SBI card website.

If one is a first time visitor to the SBI card portal, all one needs to do is fill up the registration form with the appropriate details of the SBI credit card. Once this is done, an OTP will be generated and instantly sent to the registered mobile number. After logging in with the Card number and the OTP, one can then create an appropriate user ID and password. On entering the portal, the option ‘Book Balance Transfer’ can be found to the left of the screen. Hereon, it is just a matter of filling the balance transfer form and clicking ‘submit’.

The SBI Balance Transfer options bestows multiple advantages. For one, once the balance is transferred, the interest payable for the first two months is 0%. A 2% service charge may be levied, which, compared to the monstrous 18% is almost negligible. Therefore the opportunity to save on the high rate of interest in other credit cards in wide open.

The second advantage is that the interest rates post the 60 day period is also extremely low in comparison. It rises from 0% to just 1.7%. This again, is valid up to six months, during which time the customer also does not need to pay any service charges.

Third, by transferring balances from all other cards into the SBI card, one creates a single, unified, savings-driven payment option that is dependable and hassle free.

And finally, convenience. The request for Balance Transfer will be processed within just three working days through Visa Credit Card Pay for all Visa cards. What is more, the cheque will be delivered within a mere 3 working days if the customer is located in a metro. Even otherwise, the duration if delivery is limited to just 5 working days.

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Credit card offers 0 balance transfer 12 months

Balance transfer on credit cards with 0% interest for as long a term as 12 months is a reality again. So if you have missed out on such offers in some of the recent years that have gone by, don’t worry! The scheme is here again and several card companies have got it rolled out for their customers. For people keen to take advantage of 0% balance transfer benefit, it’s just a matter of choosing the right provider and the right card.

Long term balance transfer explained

Balance transfer cards are ideally suited for people who are overburdened with piling debt on credit cards. Compounding interest adds to the finance charges and further inflates the amount already due by accruing interest with every passing month when the dues are not cleared.

A balance transfer card at this moment allows one to transfer his/her existing credit card balance right away to a fresh card and pay it off at a lesser rate of interest for a stipulated time period.

0% long term balance transfer credit card offers are further helpful as they allow the patrons to transfer the current due balance to a fresh card for an extended time period – usually 9/12/more months at no interest. 0% APR means during the time period that this rate applies, no interest is accrued on any balance transferred.

However, the amount of balance transferred is at most times subjected to a lone ‘balance transfer fee’ which is classically 3%-5% of the amount (appended to the new balance).

In most cases, applicants with excellent credit record qualify for promotional balance transfer cards like these.

The best card offers for 0% balance transfer for 12 months

The credit card industry is in general a highly competitive one. So naturally when 0% long term balance transfer cards are offered, they are offered by not one, but a number of providers. The best offers in the niche are now available in the following cards –

• Citi® Diamond Preferred® Card

• Citi Simplicity® Card

• Discover it® Card

• Capital One® Platinum Prestige Credit Card

• Barclaycard Arrival™ World MasterCard®

None of these cards charge the customers any annual fee and all of them are offering a 0% promotional APR on balance transfers for 12 months at least. To know more closely about the offers you can compare the credit cards through a finance portal offering credit card services and evaluate their offerings. 2 benefits that you are sure to receive by availing any of these 0% APR cards are –

• Extended time for debt pay off

• Less interest disbursement

Important

Finding out the right 0% balance transfer card is easy after you compare and weigh some offers from different providers. But for those looking for balance transfer it’s important to look at it as a part of a plan to do away with their credit card debt. For the purpose it’s also important to –

• Focus on enhancing the income

• Lessening the expenses

• Paying off the outstanding card dues in full before the 0% promotional rate concludes

Note : If you are concerned about how to get a Credit Card, the lot of banks has introduced a convenient “Credit Card Apply Online” system and so, you can apply for it on line. You can route your application through reputed sites like http://www.bankbazaar.com/credit-card.html also. Once you submit the required documents, the bank verifies them and issues the card very quickly. The point is that the card issuing process of the bank has been completely streamlined and hence, you can get your card sooner than you expect.

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Balance transfer facility in HDFC Bank Credit Card

Imagine a situation where you have a large balance outstanding on your credit card, but are unable to pay the entire amount within the due date. In this case, the bank will levy a huge interest charge on the unpaid amount. The interest rate charged by the bank is exorbitant, to say the least. It is therefore desirable that one does not get into this situation. But if it is impossible to pay, then there is another way out. It is called ‘Balance Transfer’, where you can transfer the outstanding balance on your credit card to another bank’s new or existing credit card.

How does the customer and the banks benefit from Balance Transfer?

The customer saves on the interest cost he has to pay. Say for example, he is required to pay Rs.40,000 on his credit card, but can manage to pay only Rs.10,000 within the due date. He will be charged a very high interest (in some cases, even 3.6% per month) on the remaining Rs. 30,000. When he transfers the balance, he can either get an interest free credit period on this amount or will have to pay a preferential interest rate, which is much lower (less than half in most cases) than normal interest rates on the card. The interest free period or the concessional interest period varies from bank to bank, but it is generally not more than 6 months. The bank to which he transfers the balance benefits as it receives a new customer. The bank from which he transferred loses the customer, but the outstanding amount is no longer unpaid. The entire amount is paid by the bank to which the balance is transferred. It is therefore a win-win arrangement.

HDFC Bank’s Balance Transfer Facility

HDFC Bank offers Balance Transfer facility to customers on its credit cards. This means an individual can transfer an outstanding balance from any card in any bank to an HDFC credit card account. The individual may or may not have this card. If it is a new card to which he is applying, he will have to carry out card opening formalities before transferring the balance. On the other hand, if he wishes to transfer the amount to a HDFC credit card which he already possesses, the process is simpler.

The transfer amount should be a minimum of Rs.2,500 and maximum of Rs. 1 lakh. The amount however cannot be more than the outstanding balance on the other card account. The eligibility criteria vary from customer to customer. Banks check the number of times you transfer the balance on your card. Too many balance transfers will lead to rejection, as it is seen as a way to enjoy interest free credit.

HDFC Bank only allows balance transfer from non-HDFC Bank credit card accounts. It is also not applicable from accounts with an overdue status or where the credit limit has been exceeded. The bank will only pay for the outstanding balance and will not be liable for any new charges, interest or overdue payments. HDFC Bank will pay a cheque or DD favoring the other card issuer while taking over the balance amount.

The bank charges 2% of the Balance Transfer amount or Rs.250, whichever is higher as the Balance Transfer processing charges. Customers can enjoy the preferential interest rate on the amount transferred for 3 months only. Beyond this, normal interest rates would apply.

There is a facility to request for transfer from different card accounts. However, this request should be made across cards at the same time and not at different points in time.

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