Pros and Cons of Card to Card Balance Transfer

The usage of credit cards in India has significantly gone up during the financial year of 2018-19. Credit cardholders were estimated to spend around Rs. 6 Lakh Crore, which was 30% higher from the Rs. 4.6 Lakh Crore in 2017-18.

However, more often than not new card holders face bill repayment issues due to owning multiple credit cards. This has led to monetary problems and debt accumulation. To tackle this situation, a majority of lending institutions and NBFCs started offering the facility of balance transfer credit card so that cardholders can maintain their payment records through one financial tool at all times.

Credit-Card-Balance-Transfer

What are the benefits of balance transfer?

Balance transfer credit cards comes with the below mentioned benefits –

  • Lower interest rates

A majority of financial institutions and NBFCs which allows balance transfer via credit cards offer various benefits, discounts, deals, etc. The rate of interest stays comparatively lower during the first few years of issuing the credit card.

  • Consolidate all your credit card debts

Owning multiple credit accounts might result into losing track of their bill payments. Henceforth, you can consolidate all your credit cards and use the balance transfer credit card facility since it is one of the convenient ways to pay your credit card bills.

  • Get grace period

One of the biggest advantages of opting for a balance transfer credit card is that it gives a grace period to credit card holders to pay off their debt with zero or nominal interest rate. Lenders usually provide a buffer period of 6 months which can extend up to 21 months at maximum. It can help you manage your monetary standing, especially if you own multiple cards as there are many pros of cons of owning multiple credit cards.

  • Get immediate relief from your debt(s)

Applying for a balance transfer credit card will give you immediate relief from all your debts. The entire process of balance transfer is quick and you will also get a moratorium period to pay off your dues at zero or nominal rate of interest.

Most of the recognised financial institutions offer balance transfer credit cards for their customers. For example, you can get the benefit of all these privileges with the Bajaj Card.

What are the cons of balance transfer?

The downsides of balance transfer credit card are mentioned below –

  • Your credit score may get affected

Balance transfer requires timely repayment of all the dues to ensure credit rating improvement. Moreover, if your credit utilisation ratio is above 50% of your credit limit, or if you frequently apply for card to card balance transfer, then your credit score might go down.

  • Interest rates increases progressively

As you reach the end of your loan repayment tenor, the rate of interest gets progressively higher. This is done to compensate for the buffer period that was given to you initially.

  • Closer of previous credit account

Balance transfer will close the existing credit card accounts altogether, which might result in a sudden drop in your credit rating. It can prevent you from applying for another advance for some time.

However, as you repay the debt of the balance transfer card, the credit rating will improve over time.

Know how to choose the right credit card for yourself to avoid accumulating debt and stay ahead of your payment schedule. Also, be sure to check for all the terms and conditions before you opt for a balance transfer credit card.

Leave a Reply

Your email address will not be published. Required fields are marked *