Balance transfers enable cardholders to maneuver excellent balance from one credit score card to a different with the choice of repaying through EMIs. While curiosity costs should apply, will probably be a lot decrease in contrast with the excessive finance costs on overdue card balances, making it a sensible technique for these battling credit-card debt. Also, they are often an efficient manner of consolidating a number of credit score card money owed. Let’s take a more in-depth look.
Card issuers supply balance transfer facility, permitting eligible cardholders to transfer dues from a number of bank cards issued by totally different banks. While the entire excellent quantity stays the identical, reimbursement turns into extra structured, as you may go for EMI plans sometimes starting from 9-18 months, relying on the issuer.
If the excellent is ₹1.20 lakh on a card. Ideally, paying off the whole excellent can be the most suitable choice. However, failing to do that may lead to finance costs, which will be as excessive as 50% p.a., relying on the card variant together with late cost costs. Moreover, till you clear the due in full, balance quantity in addition to new transactions will proceed to draw finance costs. Balance transfer may also help ease this burden.
If you decide to transfer the balance to a credit score card from a special issuer and convert it right into a six-month EMI plan at 1% p.m. rate of interest, it could lead to an EMI of ₹20,706 a month, with whole curiosity cost of ₹4,236 —considerably decrease than the standard finance costs. Since, excellent balance on the opposite card is cleared, new transactions will not accrue curiosity, additional easing your monetary burden. Hence, the transfers will be efficient in managing monetary burden as their rates of interest are sometimes a lot decrease than these of normal bank cards. However, maintain just a few issues in thoughts.
Before availing the power, you should examine the rates of interest and costs related to the present excellent towards rate of interest on balance transfer. Some issuers might also supply an EMI conversion choice in your current card, permitting you to unfold repayments over many months with out transferring the balance to a different card. However, conversion additionally comes with extra costs.
To make an knowledgeable resolution, examine the entire value of each choices and select the one providing most saving. Ensure balance transfer leads to a significant discount in general curiosity prices. Also, such transfer comes with a one-time processing price, which must also be factored into your calculations. Usually, processing price on balance transfers ranges from 3% to five% of the transferred quantity.
Interest-free interval
Some issuers additionally present an curiosity-free introductory interval whereby there can be no extra curiosity on balance transfers for, say, the primary 6 months. If you go for it, it’s essential to contemplate the EMI quantity. If you will have a big balance and select a shorter tenure, EMI turns into bigger, which may once more pressure month-to-month money circulation and put you again within the monetary scenario you are attempting to flee from. Hence, it is very important decide a tenure aligning with monetary scenario and make repayments manageable.
You can select to transfer balances between current playing cards from totally different issuers or apply for a brand new card to avail this characteristic. In each circumstances, eligibility and accessible credit score restrict might be key issues.
While it’s advisable to be disciplined along with your card spends and repayments, in case you get right into a credit score card debt, balance transfer is a viable choice. Along with balance transfer, you must also take into account different choices like a private mortgage or secured loans like gold mortgage to repay your excellent credit score card dues. Compare all accessible choices and select essentially the most appropriate and price-efficient strategy to repay your debt.
(The author is chief enterprise officer, bank cards, Paisabazaar)
Published – April 28, 2025 02:34 am IST
