A number of people opt for this facility to pay an existing credit card
The term balance transfer is used quite commonly when it comes to borrowing. Whether it's a home loan or a credit card, you are given the option of a balance transfer. In simple terms, balance transfer in credit cards means you transfer the amount you owe on one card to another card. This way, you have already paid off one card, which is a burden lifted off your shoulders. One reason why people opt for balance transfer from one card to another is that the second card may have a lower interest rate, making it less expensive to pay the card back.
How do I transfer funds from my credit card to my online account?
While you may have the advantage of making big purchases on goods and services such as household items or that hi-end television set that you have been eying for months using your credit card, you cannot pay your home loans or your auto loans using the card. This is also the case if you have a high credit card bull. In cases like this, transferring funds from your credit card to your bank account becomes a viable option. This way, you can pay your home loans and car loans directly from your bank account.
This method is useful in times of emergency e.g. in case you are abroad, and the family is in India. You can basically transfer money from your credit card to a family member's bank account. This method is also useful in case you are in an area where there is limited or no access to an ATM or a bank.
However, in case you plan on transferring funds from your credit card to your bank account, you may want to consider the following points
Consider the interest rates: Remember that if you transfer funds from your credit card to your bank account, you will be charged a certain interest amount.
You won't have interest-free days: In case you pay your credit card on time, there is no interest charged. However, if you transfer funds from your card to the bank, you will be immediately charged an interest
Pay a fee: In case you transfer funds from your credit card to your bank account, you will be charged a fee. The rate of fee depends on your card provider but is usually 3-4 per cent.
How do I transfer funds from my credit card to my bank account?
There are a few ways in which you can transfer funds from your credit card to your bank account. These include:
- Through e-wallets
- Through tools such as Western Union and/or MoneyGram
Let us look at the following
Wire transfers are the most popular way to transfer funds from your credit card to you bank account. These transactions are scrutinized by the government and need to adhere to regulatory guidelines and requirements. Among the list of details, you would require to provide are currency of transfer, international bank account number, the name of the correspondent, and the SWIFT code.
You can use tools such as PayZapp and Paytm - each of which has its own regular set of guidelines to conduct the transactions. These include the amount you can transfer, the fees that will be levied on you, and the time period when you can conduct such transfers,
Through tools like Western Union or MoneyGram
When you use money transfer companies, you have the option of sending money across the globe, but you have to provide all your details with the firm. It usually takes 1-5 day to transfer money from your credit card to your account.
List of credit cards that offer balance transfer
Several banks offer balance transfer credit cards. Here is a list of some of them:
State Bank of India: SBI's credit card balance transfer feature can be activated by logging into SBI Card's official account or even sending the bank an SMS. You can repay the amount between a period of two and six months. However, do note that you will be paying an interest of 1.7 per cent per month in case the tenure to return the money is six months.
Axis Bank: Axis Bank's balance transfer tenures are between a three- and six-month period with the minimum amount transferred coming to Rs 5,000. The three-month period does not have a rate of interest, but you are charged if you take six months to pay the amount.
ICICI: ICICI Bank allows you to foreclose the payments, provided you have paid up the amount (which includes interest). In case you avail an ICICI Credit Card Balance Transfer, then you have a three- or a six-month period to pay the amount off. There is an interest charged on the amount and is payable along with the amount transferred.
HSBC: HSBC offers balance transfer period between three months and 24 months. You can call the bank, do it online, or send the bank an SMS.
Standard Chartered Bank: Standard Chartered Bank's Balance Transfer Facility allows you to transfer amounts up to Rs 5 lakh to your Standard Chartered Credit Card. The interest rate, too, is competitive, with 0.99 per cent being paid in the first six months. Following this, you will have to pay interest rates based on the card you own. In case you are a Standard Chartered Bank Credit Card holder, then you can make a payment of a minimum of five per cent of the transferred amount every month.Kotak Mahindra Bank
: You can transfer a minimum of Rs 2,500 to your Kotak Mahindra Bank card. However, there is no limit to the maximum amount as long as it is 75 per cent of your maximum credit card limit. Like all credit cards, you can avail the balance transfer facility by logging in, making a call or sending a text message.
Things to remember
While balance transfer on a credit card is an advantage, the individual availing this feature needs to keep the following points in mind before taking this step.
- Your credit limit will reduce: The credit limit of your existing credit card reduces. This amount corresponds to amount you have transferred from the old card to the existing one. For example, if your credit limit is Rs 1 lakh, and you have transferred a balance of Rs 75,000, then your credit limit automatically becomes Rs 25,000.
- Pay off your dues asap: In case you avail a balance transfer on your credit card, then you should pay off your dues within the nominal interest rate period. If you fail to do so, you will be paying higher interest rates.
- Lower interest rates not applicable to new purchases: Do note that the rate of interest will be the one originally offered by your credit card issuer.
- Don't swipe your card: Ideally, avoid using your card for purchases until you have paid off the balance transfer amount. This will not only help you pay your card off, but will also improve your credit rating.
Will I know when I should avail a credit card balance transfer facility?
If your card has a high rate of interest, then it’s advisable to avail a credit card balance transfer to save up on interest payments.
How much can I transfer from one credit card to the new one?
You can transfer an amount equal to the credit card limit of the new credit card i.e. if your credit limit on your old card was Rs 1 lakh and you need to do the balance transfer to the new card that has a credit limit of Rs 50,000, then you can only transfer Rs 50,000 to the new card. You will have to pay the rest of the Rs 50,000 on your own
Is balance transfer profitable?
This mainly depends on the interest you are paying on your existing credit card compared to the rate of interest in the new card. If there is a substantial difference, then a balance transfer makes sense.
Does credit card balance transfer take a long time to process?
No. Credit card balance transfer is a quick and almost hassle-free process. The time taken usually is a few days and varies from bank to bank.
How many times can I transfer my credit card balance?
Banks too do not entertain constant balance transfers. As such the number of times you can transfer your balance is a subjective thing which is purely at the discretion of the bank you have in mind.