What is credit card balance transfer? How does it help to clear debts?
Credit cards are tricky and often leads people to a unending circle of debt. Transferring the balance to another card with a lower interest rate can be a way out of this debt trap.
Getting a credit card gives you the liberty to splurge even when you don’t have the money. While we all start small by convincing ourselves that it is a small amount and we can pay it back soon, things slowly go out of hand and we get a reality check at the end of the month when the monthly statement arrives. One thing leads to another and it's clear that there is no way to repay the entire amount in one shot, thus remaining stuck in the vicious cycle of debt.
As a result of high credit cards debt, the CIBIL score also goes down. While people opt for various options to repay their debts, one thing which can be considered is getting the balance transferred. It not only reduces financial stress and also strengthens the cardholder's money management skills.
But what is a balance transfer in credit cards and how does it help in debts? Read on to know about it.
What is a credit card balance transfer?
In a case where someone has a significantly high outstanding debt on their credit card along with a high-interest rate, a balance transfer is something that can be beneficial. Cardholders can transfer their pending dues to another financial institution with a lower interest rate. While not all banks allow a balance transfer, there are a few who do and that’s why one needs to make an informed choice while picking a credit card.
How can balance transfer option help in credit card debt?
Tansferring the due amount to another issuer can reduce the interest rates, it will definitely help the credit cardholders in clearing their debt and also keep track of the due dates in case of multiple debts.
In case of annual percentage rate (APR), if the APR is high on the existing credit card, transferring the balance to a card with lower or zero APR can help in saving interest payments. The interest that cardholders will need to pay next will be decided by their new credit card issuer.
How to do a credit card balance transfer?
1. Search for a new credit card at a bank that comes with a balance transfer feature and apply for it.
2. Next, inform the bank to initiate the balance transfer facility.
3. Provide the details of your existing card and also notify the amount to be transferred.
4. Once the balance transfer is complete, start clearing off your dues within the stipulated time.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.