A balance transfer credit card allows a customer to have a special window of interest-free period where they can bring the existing debt from other cards into the new ones and pay that without the load of interest.
The term balance transfer itself suggests that one can transfer the remaining balance from other cards to the new ones where they can manage the financial debt faster by getting a window of typically three to six months of interest-free period to recover from the debt.
Now, it’s important to understand how the entire process functions and whether or not it’s beneficial for you, depending on your current financial status.
Workings of Balance Transfer Credit Cards
There are several ways a person can get a balance transfer card, as one might get some offer from the bank agent directly or search through a DSA app or website and check the availability of the balance credit cards for the person. Here are some steps that o
- Application Process
In the application process one gets to typically understand how much the interest the bank will charge on the balance transfer. In most of the prominent cards, the interest on balance transfer is 0%. However, approval of the card depends on the current credit score of the person and the card criteria of the bank.
- Transfer of Balance
After the approval of the card, one can choose the balance transfer option, where the existing debt from the other cards is transferred to the new card, and the entire debt is now on the new one, which is free of interest.
- Start of the Introductory Period
Once the transfer is done, the start of the introductory process begins when, typically ranging from 3-6 months. The balance needs to be paid by the customer so that they don’t incur any extra interest from that card.
- Post Introductory Period
In the post-introductory period, a person might face the risk of getting interest on the existing debt if that doesn’t get repaid within that introductory time. It’s a financial assistance tool that offers a limit to the customer on free interest payments. However, it’s important to check the APR of the card after the introductory period to understand the actual interest of the card.
- Fees of Balance Transfer
Fees are also included in the balance transfer cards, and a person needs to have a strong idea about the percentage the company will cut on the total amount of the transfer. Typically, it ranges between 3-5% of the entire amount that gets transferred. It depends on the customer to check and find whether the transfer still helps in savings even after the transfer fees.
Benefits of Balance Transfer Credit Cards
There are some real benefits of balance transfer cards. Through that, an individual can work on particular products which will help them to pay off the EMIs early without the burden of the interest that credit card companies levies on large transactions.
- Helps to Save on Interest
The first advantage of a credit card balance card is that it helps to reduce the percentage of the interest rates one is paying on other cards. An individual becomes subject to interest payments to credit card companies when the customers opt for the easy EMI options. Through that, they introduce themselves to the process of debt accumulation. Balance transfer credit cards come as a solution for that person.
- Helps in Consolidating Debt
The next thing that a person can do is to consolidate debt, and through that, they can manage to pay off all the existing ones, and also at a minimal or zero interest rate. A person can take the help of a personal loan DSA to help them with the process of debt consolidation and to become financially free in the process.
- Helps to Build Excellent Credit Record
Balance transfer credit cars are a great way to stop all the EMIs that have been going for years, complete all the payments and start afresh. It allows a person to develop a high credit score, which makes them eligible for multiple loan offers that can further show the strong financial position of the person.
On a finishing note, it can be stated that for a disciplined borrower credit card or balance transfer is the ultimate tool that can help them to achieve the goals of their life without worrying about existing debt.
