Use Balance Transfer To Lower Your Monthly Card Outgo

Balance transfer is another of the benefits that credit card companies offer. This is another way in which you can save on the higher interest rates that the cards charge you.

First, let us understand what the term ‘balance transfer’ means. This is a process by which a customer can transfer the outstanding balance in one card to another, against which they can enjoy advantages like lower interest rate, processing fees or even teaser rates. This benefit is often highlighted by card issuing banks as an offer to new customers. Customers who already have higher dues and are paying higher Annual Percentage Rate (APR) can use this as a way to reduce their interest burden on the outstanding amount due.

Such an arrangement is also attractive to consumers because the credit card issuer offers certain incentives. These range from low interest or interest-free periods to loyalty points or some other single or combination of incentives. Credit card companies, on their part, use this process to net new customers.

Though this looks like an attractive proposition, customers need to look closely at the terms and conditions at which the banks are offering the balance transfer. The first is at what rate the bank is offering this facility – lower the rate, the better is for the customer. It is sometimes seen that while transferring balance, the issuing bank offers you interest-free period for the transferred amount till the time the next statement is generated.

The second factor that needs to be looked at is the teaser rates (if any) that the bank is offering. With the initial rates being low, transferring customers have to pay lower than normal interest. This ultimately means lower initial monthly outflows of money to the credit card company. The 0% rate is the most common when a new credit card account is opened. But one has to remember that this rate is temporary, and its duration varies from 6-15 months, after which the remaining transferred balance is subject to the purchase rate.

All in all, the balance transfer facility surely makes for an interesting proposition, which can help you lower your monthly outgo on our card dues to some extent, provided you use it in a proper manner.