Credit Card Balance Transfer: Interest rates to fees, key factors to check

Credit card spendings have surged by around 19% year-on-year, reaching Rs 1.73 lakh crore in July 2024, according to the Reserve Bank of India (RBI) data. While credit card usage continues to rise, excessive spending can turn into a financial burden. High-interest rates and late payments can quickly accumulate, trapping you in a cycle of debt. One way to alleviate this burden is a credit card balance transfer.

Before availing the credit card balance transfer facility it’s important to know how it works and when you should opt for it.

What is a credit card balance transfer?

A credit card balance transfer is a process where you move the outstanding debt from one or more credit cards to another credit card, typically with lower interest rates. The goal of a credit card balance transfer is to help you save on interest payments and to pay off your debt faster.

How does a credit card balance transfer work?

The credit card balance transfer works through a simple mechanism. You can shift the existing outstanding balance on a credit card to a new credit card, but the key is to consider the overall costs in doing so. Here’s  how the process works:

• Look for a balance transfer credit card: Look for a credit card that offers a balance transfer option, preferably with a promotional low or zero interest rate. You can also explore options on platforms like Moneycontrol which provides credit card offers from its partner banks allowing eligible users to access these offers directly on their credit score dashboard.


• Request the balance transfer: Once the card is approved, request to transfer your existing credit card balance to the new card. You’ll need to provide details about the credit card or cards from which you want to transfer the debt.


• Pay off your debt: Once the transfer is completed, you’ll start paying off your balance on the new credit card. If you’re within the promotional period, try to pay as much as you can to clear the debt before the interest rate rises.


• Watch for fees: Keep in mind that a balance transfer credit card issuer may charge a fee, usually a percentage of the transferred amount.

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When should you opt for a credit card balance transfer?

Here are a few scenarios when you can opt for a credit balance transfer:

• You’re struggling with high-interest debt: If you’re stuck with a large amount of credit card debt on one or more cards, especially if the interest rates are high, a credit card balance transfer can provide significant relief.


• You have a proper repayment plan: Before considering a balance transfer, ensure you have a clear repayment strategy in place. The key to benefiting from a balance transfer credit card is to pay off the debt during the promotional period when the interest rate is lower.


• You have multiple credit card payments to made: Juggling multiple credit card payments can be stressful and can sometimes lead to missed payments, which hurt your credit score. A credit card balance transfer consolidates your debt into one card, making it easier to manage your finances.


• You have a good credit score: Balance transfer offers with low or zero interest rates are usually available to individuals with a good to excellent credit score. If you fall into this category, you’re more likely to qualify for attractive balance transfer credit card offers. You can check your credit score using Moneycontrol’s credit score dashboard, which also highlights credit card offers from partner banks.

Things to consider before opting for a credit card balance transfer

• Balance transfer fees: Most balance transfer card issuers charge a fee for transferring the balance. This fee can range between 1% and 5% of the total balance you’re transferring. Although this might seem like a small amount, it can add up, especially if you’re transferring a large balance.


• Promotional periods are temporary: The low or zero interest rate on a balance transfer credit card is usually limited to a specific promotional period. Once that period ends, the interest rate may increase significantly. Be mindful of this timeline.


• Impact on credit score: Applying for a new credit card involves a hard inquiry on your credit report, which can temporarily lower your credit score. In addition, if you fail to make timely payments on your new balance transfer credit card, it can negatively affect your credit score.

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How to pick the best credit card for a balance transfer?

Here are some factors to consider when choosing a card:

• Introductory interest rate: Look for a card with the lowest possible interest rate during the promotional period.


• Duration of promotional period: A longer promotional period gives you more time to pay off your balance at a lower interest rate.


• Balance transfer fee: Compare the fees charged by different credit card issuers to ensure you’re not paying more than necessary.


• Post-promotional interest rate: Be aware of the regular interest rate that kicks in after the promotional period ends.

On the Moneycontrol app, you can check a variety of credit card options from partner banks. You can browse these offers on the platform and choose the one that best suits your needs.

In conclusion, a credit card balance transfer can be a valuable tool for managing debt, reducing interest payments, and simplifying your finances. But it’s essential to understand the terms and conditions of the balance transfer offer, have a solid repayment plan, and make sure the transfer costs don't outweigh the benefits.