The use of credit cards is increasing rapidly. Spending money with a credit card is exactly the same as taking a loan from a bank and spending it. In such a situation, there are many times when people do not have enough money to repay their debt i.e. to pay the credit card bill. If you ever find yourself in such a situation and you have multiple credit cards, you can use the facility of balance transfer.
First know what is balance transfer?
Through balance transfer, you can pay bills from one card to another. This process itself is called balance transfer. Suppose you have an outstanding on one of your credit cards, but you are not able to pay it. If you plan to pay it next month, then you will have to pay late fees as well as interest on that money for almost a month. This interest can also be charged at the rate of 36-48 percent per annum. In such a situation, if you have another credit card, then you can transfer the balance at much less interest than that.
How is the balance transfer done?
There can be two ways to pay the bill from any credit card to another card i.e. transfer the balance. The first way is that you have to call the customer care of the bank and get the balance transferred from them.
Another way is to transfer the balance yourself from the bank’s app or website. However, for this you will need card details. On the app or website of the card from which money is to be transferred, you will have to fill the balance transfer amount and the details of the card to which money is to be transferred.
On the other hand, you can also choose the method of repaying the balance transfer. Either you have to pay lump sum amount or you have to take EMI option.
What are the benefits of balance transfer?
If you do not transfer the balance, then you will have to arrange money from somewhere to pay the full bill of your card. For this, either you will have to pay late fees and heavy interest, or you will have to take a loan and pay interest on that too.
A big problem in the loan will be that the loan will not be available for the whole month or even for 2-3 months. On the other hand, if you transfer the balance, then in that case the extra money you will have to spend will be less.
At the same time, due to non-payment of the bill, you will not even come in the category of defaulting, due to which your CIBIL could have been damaged. EMI facility is also available in balance transfer. In such a situation, the balance which you are transferring from one card, you can pay it gradually in EMI.
When does balance transfer become a problem?
Balance transfer sounds great, but if understood in simple language, you are taking another loan (payment from another card) to repay one loan (credit card). Although transferring balance once or twice will not be much of a problem, but if you use it too much then it can affect your CIBIL score.
One major problem with this is that if you use balance transfer multiple times for different cards, you may end up in a new debt trap while repaying the loan. If you pay the balance transfer amount on EMI, then gradually your EMI may increase every month, which can become a burden on you.