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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Credit card is undoubtedly a very easy mean of access to money whenever required. Today payments with credit cards come with added advantages and offers that are eligible for credit card users. But you need to be very smart in using credit cards because you can land up in massive debt. The best way to avoid such a situation is turning to credit card balance transfer.
What is a Credit Card Balance Transfer?
As simple as the name suggests, the facility to transfer the balance amount of one credit card to that of another is called Credit Card Balance Transfer. The reason customers go for this method is when they observe that they have to pay higher rates of interest for the debt amount in one credit card, shifting the money to another credit card seems like a fair deal. It also buys some time to arrange for the payoffs.
Important Features of Credit Card Balance Transfer
1. Financial Management: Besides the advantages of evading interest rates and buying time, credit card balance transfer can be an important tool for financial management. For those who have multiple credit cards with different payment dates for the debt amount, it is a great tool to transfer all the pending payments under one umbrella – one credit card and pay off accordingly, saving in respect to interest rates and late charges.
2. Additional Incentive: Many banks these days give additional perks like discounts in air ticket booking and giving reward points to customers when they go for transferring the credit card balance to a new one.
3. Credit Score: To be eligible for credit card balance transfer, it is essential to have a good credit score. You must be shifting the money based on the lower interest rate, but at the end of the day, you have to repay the money one way or the other. Any inconsistency with respect to paying EMIs or other bank loans will result in a lower credit score and higher possibility of not being eligible for credit card balance transfer.
4. Additional Features: It comes with advantages which include instant transfer, less documentation to even paperless money remittance. Besides, there are times when banks give periods of no interest which a credit card holder can take advantage of.
There are some important aspects to realize while availing of this facility. There is an advantage to transfer the money for a lesser interest rate, but at the end of the day, the debt amount remains the same. Hence it is better to address the debt payment with added importance. Besides, the credit card balance transfer does not come without charge. There is a transaction fee that is applicable for the transfer, which definitely varies with each bank and which also depends on the amount to be transferred.
Credit card balance transfer definitely is a great advantage for credit card users, but at the end of the day, you need to spend money wisely through credit cards so that you do not land up in huge debts.
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