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How Credit Card Balance Transfer Work

How Credit Card Balance Transfers Work

Balance transfer of a credit card is when you move the outstanding debt on one credit card to another card, usually a new one.This is normally used when one wants to move the amount owed to a new credit card which provides lower interest rate, fewer penalties, and superior benefits, than the current used card.

Offering Free Balance Transfer

Often credit card companies give free balance transfer in order to entice people to choose their products. If one works out these offer diligently, they can take advantage of the incentives and avoid high-interest rates while paying down debt. But be careful, as many credit transfer might involve unexpected charges and conditions.

8 Steps for Credit Card Balance Transfer

If you find a new credit card with a 0% interest balance transfer offer, follow these steps before you actually make the move for completing the transfer.

  1. Choosing Balances to Transfer

Make a note of your credit cards balances and their interest rates. Choose the cards whose outstanding you like to transfer to save money on interest. Then find a new card which offers less or 0% interest to transfer your current debt.

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  1. Calculate Your Balance Transfer Fee

Check if there is any balance transfer fee, and how much you’ll have to pay if you want to transfer. The fee is usually 0% to 5%.Use an online balance transfer calculator to calculate, if with the new lower interest rate, would you still save some money?

  1. Understand the Penalties

Once you have transferred to a new card, you cannot ignore the balance and not pay. You still have to make the minimum monthly payment on the card before the due date to keep that 0% rate. The balance may start incurring interest if you miss any payment. Check the interest rate you’ll pay, if you default under any of the agreements. Sometimes the penalty rate is as high at 29% for a cheque bounce, or a late payment, or even going over your limit.

  1. Look for Promotion End Period

Usually, the promotion period of 0% rate is valid for 12 to 18 months. Look into if you can pay off the transferred amount within the introductory period, if not then calculate the interest rate which you will have to pay when this period ends and if the transfer is turning out to be feasible.

  1. Meet the Basic Requirements

As a basic rule, you cannot do a credit card balance transfer of your new account with the same bank as your current card whose outstanding amount you want to clear off. For e.g. you can’t transfer your current card of AXIS Bank to a new card of the same bank.


  1. Decide How Much to Transfer

Confirm the credit limit on your new card, as you cannot request a balance transfer for more than your available credit limit which is inclusive of the balance transfer fees.  For e.g. If you have a credit limit of Rs. 1,00,000 you won’t be able to transfer a balance of Rs. 1,00,000 with a 3% balance transfer fee.

  1. Requesting the Balance Transfer

Though it’s named balance transfer, you are actually using one credit card to pay off another one. So this is how it works –

  • Balance transfer by checks: The new card issuer may take a post dated check, or even let you make the check out to yourself, though make sure this is not a cash advance.
  • Online transfer: The name, payment address, and account number of the card whose balance amount you are paying off, and the amount you want to transfer are collected.
  • Direct deposit: The bank account into which you want to deposit the balance transfer funds.
  1. Keep a vigil on your old and new accounts

Inquire, about the transfer time frame, which should be around 2- 10 days. During this period, your new creditor will pay off your old creditor. So keep a watch on the old account whose balance you’re paying off to see when the balance transfer clears on your new account as you would want to use the card to make further purchases.



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