Sometimes, the balance on your credit card can get very high, and credit card companies charge a lot of interest on this.
Additionally, you might lose the benefit of an interest-free period on new purchases. If you have more than one credit card, managing them can become even more complicated.
In such situations, the balance transfer facility can help you. This option allows you to transfer the outstanding balance from one card to another.
While interest is still charged on the transferred balance, it is usually much lower than the regular credit card interest rates.
Benefits of Balance Transfers
One advantage of balance transfers is that some banks offer introductory periods of 3 to 12 months where you pay little to no interest on the transferred balance.
However, these offers can vary between banks. If you have a good credit card limit, you can transfer balances from multiple cards to just one card.
This reduces your debts from many to one, making it easier to manage and repay.
Are There Fees on Balance Transfers?
When you transfer a balance, your total interest expenses can decrease significantly.
This is because the outstanding balance on your other credit cards becomes zero, allowing you to benefit from the interest-free period again on new purchases.
However, it’s important to note that there is usually a one-time fee for balance transfers, which can range from 3-5% of the transferred amount.
Do Your Homework Before Transferring
Before you transfer a balance, it’s crucial to do some research. First, check the interest rate on your current card
and compare it with the rate on the card you plan to transfer the balance to. Additionally, understand the balance transfer fee and the terms and conditions that apply.
Early Repayment Perks
Some banks offer perks for early repayment of the transferred balance. For instance, SBI Card does not charge any interest if you repay the balance within 60 days.
If you choose a 180-day repayment period, the interest rate is 1.7% per month.
