Balance transfer is best option to reduce burden of dues of credit card

Many people find using credit cards very convenient but can bring inconvenience if you are not satisfied with the services of your credit card company. In such cases many people want to close that credit card but if there are some dues to be paid off then you can’t close the card. Here you can use balance transfer option.

The balance transfer facility is offered by credit card issuing companies in which they allow transfer of any outstanding balance on a credit card to a less-used or a new credit card of another company. Generally, banks encourage such a practice and offer either a low-interest or interest free period as incentives to customers who use balance transfer facility.

However the credit limit of the less used card or the new card from which the facility is being used is reduced proportionately to the balance transfer amount. For instance, if your credit limit on the new card is Rs 1,00,000, if you have opted for a balance transfer of around Rs 40,000, your credit limit will be reduced to Rs 60,000. Moreover the balance transfer limit cannot exceed 80 per cent of the credit limit.

When to use this option?

In India interest on credit cards are quite high therefore, if you find a card which has low interest rate in comparison to your current card you can use this option. The interest cost will reduce by transferring the outstanding balance on to a new credit card.

If you are not satisfied with the services provided by the current card company like improper billing, non-receipt of bill, etc, you can get rid of the company using the balance transfer facility.

In case the outstanding balance on your current credit card is quite huge and you are unable to finance it, the balance transfer can offer temporary relief. In case of short-term liquidity crunch or there is an exorbitant debt to pay off the credit cardholders can use this option.

To attract customers, banks offer low interest rate or sometime zero interest on balance transfer for specified period. But these so-called attractive rates are offered for a limited period. Introductory period is usually between 3 and 6 months. After this, bank charges the normal rate of interest, which currently is between the range of 38% and 425. On this processing fee is also charged which can range between 2% and 5% of the total amount.

How to do balance transfer?

Contact the credit card company to whom you would want your outstanding debt to be transferred to.

Get the form and fill in the details of your old credit card along with a copy of your latest credit card bill and submit it with the company.

Within 7 to 10 working days, the new credit card will send you a demand draft (DD) in the name of your old credit card issuer. Give this DD to your old credit card company, who will in turn clear your outstanding payment and the same will be transferred to the new credit card issuing company.