Usage of ‘Plastic Money’ i.e. payments using Credit/Debit cards have been increased a lot. Banks and financial institutions are also coming up with different types of Credit cards with attractive offers to attract more and more people. But it is very important to understand the terms and conditions of the offering agency before finalizing your Credit card. As this convenience can lead to put you into debt. As every credit card holder understands that the financial transactions using credit card is a debt that needs to be paid back within the grace period offered by the credit card company. Failing to make payment within time attracts heavy interest rate on the amount due. So lets have a look how balance transfer credit card can save you from heavy interest payments on default.
What Is A Balance Transfer Credit Card?
Balance Transfer credit card is special type of credit card which either charge zero or very low interest rate on the balance. In other words, a credit card holder can use the balance transfer to make payment of the other (higher interest) credit cards or loan to save the interest payment.
For Example :- I f you have due balance on your existing credit card (A) for which you are or you have to pay heavy interest rate then you can make the payment of your A credit card or loan with your balance transfer credit card (B) and save your cash. For an instance if you are paying 10% interest on Rs 20,000 then you have to pay Rs 5333 (20,000/6 + 10% of 20,000) every month for six months to pay off the debt. You can save the interest amount by paying your ‘A’ credit card debt with ‘B’(zero percent card). With this now you need to pay Rs 3333, saving Rs 2000 per month.
Is there Any Catch in Balance Transfer Credit Cards?
This is very common question which will come from 90 out of 100 people. So lets have a answer to this :-
- First of all balance transfer credit cards offers zero or low rate of interest for the initial three to twelve months. Which means you can save interest on your balance for a short span of time, so if you will fail to make payment with that duration then you will be charged high rate of interest.
- Almost all the banks offering balance transfer credit card charges some percentage of the transferring amount which varies from the offering institutions.
- Some of the credit card companies offers free or lower rate of interest only for the transferring balance. In other words, if you make any new purchase or payment with this card the normal rate i.e higher rate of interest will be charged.
- Some credit card companies makes it compulsory for the customer to pay off the transfer balance amount before making any payment for the new purchases made through this card. In such cases it is advisable to avoid using balance transfer card for making any new purchases.
Things To Know Before You Apply For The Balance Transfer Credit Card?
Before applying for the balance transfer credit card it is always advisable to understand all the term and conditions of the card. The most important points that you should check are :-
- Duration of zero/low rate of interest :- Longer the duration beneficial the plan for you
- Charges on balance transfer (if any) :- Prefer to take a card which is free from balance transfer charges.
- Maximum limit on balance transfer amount (if any) :- Prefer to take a card which is free from any such limitation.
- Annual Fee (if any) :- Prefer to take a card which is free from annual fee.
- Cash Back/ Reward Point Offers (if any) :- Prefer to take a card which offers you schemes like cash back or reward points.
- Your credit score :- You should know your credit score as these card companies check your credit score before approving your request.
Benefits Of The Free/Low Interest Balance Transfer Credit Cards?
Save Cash :- Using balance transfer credit card will help you save the amount of interest.
Consolidate Debt Balance :- Using balance transfer credit you can make payments of other cards using one, it will help you consolidate your payments and help to track your financials easily.
Other Payments :- You can also transfer other debts i.e other monthly payment debts like loan etc..
Things To Remember :-
Although we have seen number of benefits of having a balance transfer credit card but there are few things that you should keen in mind:-
- Always make timely payment of your balance transfer credit card as non payment can lead to cancellation of lower rate application on your balance. Which means you will be charged heavy rate of interest on your balance amount.
- You should not apply for another balance transfer card on expiry of one as maintaining multiple Free/low interest balance transfer credit cards with high debt can spoil your credit rating.
How To Find Or Get The Best Free/Low Interest Balance Transfer Credit Card Deal?
The best way to find the best free interest balance transfer credit card deal is internet. You can find and compare multiple deals to find the best which suits your needs.