Credit Card Balance Transfer: What you need to know?

If your’re struggling to pay your credit card bills due to high interest rates, then a credit card balance transfer may be an optimal solution. Often, people cannot completely pay off their credit card dues, as the interest increases with every billing cycle based on the outstanding amount. 

In such a case, opting for a balance transfer can help you clear your debts affordably. However, credit card balance transfer is ideal only under specific conditions. Thus, it’s imperative to understand when to transfer balance from a credit card and its effect on your financial health to make an informed decision. 

Here is all you need to know.

How Does Balance Transfer Work

The credit card balance transfer is very straightforward. It starts with choosing a credit card offering a lower interest rate than your existing issuer. After that, you transfer your outstanding or unpaid credit card bill to the new issuer. 

Once done, your bill will be lower in consecutive statements.  This will help you save more money every cycle, so you will have additional funds available each month. You can use this saved sum to pay more than the minimum due. Over time, your outstanding amount will get paid, helping you repay your credit card debts hassle free. 

When Should You Opt for This

A credit card balance transfer is an ideal solution if the high interest rates affect your budget. Alternatively, if you have multiple credit card debts, opting for a balance transfer is right for your financial health. 

However, this option is only beneficial if you have a low introductory APR and have access to additional benefits. Therefore, you must thoroughly compare multiple options when choosing a new credit card issuer. 

Also Read: How to increase credit card limit?

Advantages and Drawbacks of Credit Card Balance Transfer

To better understand what is a credit card balance transfer, here are a few of its pros and cons for comparison.  

Pros	Cons
It offers you a lower interest rate on your outstanding credit card billsYou can easily manage the bill amount within your budget  Helps accelerate your debt repaymentsHelps improve credit score with timely repayments Improves your credit utilisation ratio, giving you access to more credit	The issuer may require a good credit score without a history of default The credit card balance transfer may attract a fee of up to 5% of your outstanding amount, adding to your financial burdenIntroductory APR don’t last foreverHard enquiry for a new card may hurt your credit score temporarily

Other Strategies to Pay Credit Card Debts

In addition to knowing what is balance transfer in a credit card, you must be aware of other options to make well-informed decisions. 

• By prioritising your debt repayment and reducing unnecessary expenses, you can pay a little extra every month. This way, you can pay your dues faster without attracting much interest. 
• With multiple credit cards, you can focus on paying the bill with the lowest interest rate first. This is a snowball strategy of repayment. 
• Alternatively, you can start by closing the card with the highest amount, known as the avalanche strategy.
• You can use your emergency funds.
• In the worst-case scenario, you can ask your issuer for a moratorium period to sort your finances.

In addition, you can opt for debt consolidation with a personal loan. With the Fibe Instant Personal Loan, you can get sufficient funds for all your financial requirements, without any credit score check and minimum documentation. This is why it’s one of the best options for all your planned and unplanned expenses. 

You can secure up to ₹5 lakhs at an affordable interest rate and with flexible tenure options. Furthermore, it has nominal fees and charges, no foreclosure fee, 100% digital application, no physical paperwork and 2-minute disbursals. Download our Personal Loan App and apply now. 

FAQs on Credit Card Balance Transfer

How does credit card balance transfer work?

By getting a credit card balance transfer, you can reduce your interest liability every month. This way, you will have additional cash to pay more than the minimum dues. Using this surplus amount, you can close your credit card bill faster than you could have with a higher interest rate. 

Is balance transfer a good idea for credit cards?

Yes! Opting for a balance transfer is a good option if the high interest rates exceed your financial capacity. This is especially helpful if you are unable to clear the entire bill amount in a single go. As a result, the interest gets added to the outstanding amount, increasing your monthly repayment amount.

Do balance transfers hurt your credit score?

Since applying for a new credit card comes as a hard enquiry, a balance transfer does hurt your credit score for a short period. However, you can gradually improve your credit score by paying your bill in full and on time. 

How many times can I do a balance transfer on a credit card?

There is no limit to how many times you can opt for a balance transfer. However, be mindful of its effect on your credit score. Ideally, you should wait up to 120 days before you can initiate another balance transfer. Once you transfer the amount, clear your balance without delay so that your credit score doesn’t get affected.