Troubled by huge credit card bills? How to avoid being a defaulter

Credit Card Bill: Credit cards have become a necessity for many people these days. Even if you don’t have cash on hand, you can easily shop with a credit card, often enjoying better discounts in the process. However, every purchase made on a credit card is essentially a loan that must be repaid within the grace period. If you repay the amount within this period, no interest is charged. But if you miss the deadline, steep interest charges apply.

This is where the risk of a debt trap begins. If you are one of them and struggling with a large credit card bill, a balance transfer might be a helpful solution. This method can prevent you from falling deeper into debt—but it requires you to have more than one credit card. Let's explain what a credit card balance transfer is, when it’s beneficial, and when it could pose a risk.

What is a Balance Transfer?

A balance transfer allows you to pay off your credit card bill by transferring the outstanding balance to another credit card. To do this, the second card must have a sufficient credit limit, as you can only transfer up to 75% of the available limit. The bank facilitating the balance transfer typically charges a processing fee and GST for this service.

Benefits of a credit card Balance Transfer

The main benefit of a balance transfer is that it allows you to pay off the balance on one card using another card, giving you a fresh grace period to repay the debt. If you pay the amount within this new grace period, you won't incur any interest. This helps you avoid becoming a defaulter, protecting your credit score from being negatively impacted.

How to perform a Balance Transfer

There are two ways to initiate a balance transfer. The first method involves calling your bank's customer service to request the transfer. The second option is to use your bank’s app or website to transfer the balance yourself. You'll need details for both cards, and you can choose to repay the balance in a lump sum or through EMIs.

When a Balance Transfer could become a problem

Occasionally using a balance transfer isn’t an issue, but relying on this method frequently can negatively affect your credit score. Additionally, if you fail to repay the transferred balance within the new grace period, you risk falling into the debt trap again. This is because credit card interest rates are high and calculated on a compound interest basis, making it easy for the debt to grow quickly.