Balance Transfer Credit Cards or Transfer Charge Cards offer to the cardholder the facility of balance transfer. By this facility,an outstanding debt balance on your one credit card can be transferred to another that is newer or less used. But the credit limit of the latter will have a reduction to the extent of the transferred sum.
For instance,suppose you transfer your outstanding debt of Rs. 20,000 on your credit card A to credit card B which has a credit limit of Rs. 50,000. By this, the credit limit of credit card B is reduced to Rs. 30,000. Again, the balance transfer amount should not exceed 80% of the credit limit. For example,if the credit limit of your card is Rs. 50000, you can transfer to it only an amount up to Rs. 40000.
Balance Transfer Charge Cards may offer zero interest balance transfer. In order to induce potential customers to change from other cards to theirs, banks often offer low or zero interest balance transfer. But this is only for the intro period of 3-6 months. After that the transferred amount acquires its original rate of interest.
If you want to avail a balance transfer credit card, as a first step,you have to apply to the charge card account issuer for the facility of transferring your credit amount. Then on approval, your outstanding debt will be paid off by the card issuer and the due amount will be transferred to your new charge card.It may take 1-2 weeks to get the amount transferred.If you are not wary, your payment date may fall in between and you may not notice it. This will adversely affect you credit report. Hence, make it a point to pay the minimum due amount till the transfer is made.
Charge card companies may offer free balance transfers to woo customers. They may offer you two, one or zero percent interest. But this may be only for an initial grace period. But this opportunity can be used to reduce your credit card account debt. Before applying for a balance transfer, you need to look into the terms to know if there are some hidden costs.
There may be some initial fee or annual fee. Zero percent balance transfer credit cards gives you the facility of paying off debt along with saving money. You can save the 16 to 18% interest that you are supposed to pay otherwise.
Balance transfer credit cards can get you money on emergency. You can even transfer money to your bank account or you can transfer through cheque. Balance transfer charge cards can change your habit of delaying payments. As you are pushed into paying off purchases, you can save interest otherwise payable.
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Tags: charge cards, credit card debt, credit cards, Finance, personal finance
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