Unable to pay credit card bill on time? Try balance transfer

    I am tired of hearing peoples saying that they are scared about paying credit card bill of that month since they overwhelmed their budget. I often see my office colleagues ,my family especially my sister and my friends often overshoot the free credit period for purchases made through your credit card, and end up paying an exorbitant interest for their impulsive purchases. Even those who use multiple credit card more than a decade is not good in managing their budget, the worst thing is they are not even aware of the fact that there is a facility provided by their banks to pay the outstanding amount beyond due rate at very minimal interest rate…….. sounds weird?

Yes  this is true, there is a way out. You can reduce the interest burden by transferring your balance to another credit card issuer. This is called the balance transfer facility. Balance transfer could be a convenient way to delay your card payment with minimal interest, giving you time to arrange funds.

Making a partial payment or not paying your credit card bills can attract a high interest rate, more than 30 percent per annum in some cases, and can push you into a debt trap.

Using the balance transfer option provided by many credit card issuers in India, the interest outgo could be reduced to as low as zero percent for a few months, giving you enough time to arrange funds. Most banks would charge a nominal processing fee for this option.

HOW does this works?

Instead of paying an interest of 2.95 per cent per month on your outstanding dues, you can transfer the balance to another credit card issuer, and pay a lower interest rate. The new interest rate on the transferred balance may range anywhere between 0.99 per cent and 1.75 per cent depending on the banker and the card chosen by you.

Credit card companies usually do not allow you to transfer your balance from one card to another card provided by the same issuer. For instance, you cannot transfer balances from your ICICI silver card to an ICICI GOLD card or vice-versa. But you can transfer your balances from ICICI silver card to ABN Amro GOLD card. However, the transfer request might not be accepted if you have exceeded the credit limit.

What interest do you pay?

The interest rate differs from bank to bank. It also depends on the card you choose to transfer. Generally, the transfer rate for a premium card is lower than that for a normal card. Here is the list of few banks which provide balance transfer along with their interest rates

Axis	3 m - 0% p.m. 6 m – 0.75% p.m.
Corporation Bank	75 d - 1.50% p.m.
HDFC	0.50-2.0% p.m.
HSBC	6 m & 12 m – 1.25% p.m. 18 m & 24 m – 1.50% p.m.
Citi	12.0% p.m.
Standard charted	First 6 m -0.99% p.m.
Sbi	First 60 d – 0% p.m.  6 m – 1.70% p.m.
Icici	0 % p.m.
Kotak	3 m – 0% p.m.
Punjab National Bank	6 m – 0.99% p.m.

Using the balance transfer option provided by many credit card issuers in India, the interest outgo could be reduced to as low as zero percent for a few months, giving you enough time to arrange  funds. Most banks would charge a nominal processing fee for this option.

Will the lower rates apply for all future transactions?

The lower rate that you get by transferring your balance is applicable only for said specified months. After that, your outstanding dues will be charged at the normal 2.95 per cent a month. During this period, all your payments will be directed towards your balance transfer account, while all fresh purchases will be charged at the normal rate.

You might also get a preferential interest rate if you already hold an account with the bank whose card you wish to transfer your outstanding dues to. For instance, existing customers of HDFC bank get a lower- rate at 1.45 per cent. For non-HDFC customers, it is 1.65 per cent. Check with your banker for a preferential balance transfer rate if you hold an account in one of these banks.

Having more than one credit card is a basic requirement for using this service, though one still needs to carefully check and calculate the processing fee and various interest rate options available on a particular credit card.

Many experts say that the availability of this service should not be the only criterion for making purchases and people should try and stay within their budget.

"While it is an excellent way to save interest, and one can certainly make the most of this facility to gain some time to get one's personal finances in order, it is inadvisable to use this facility only as a means to delay payments," says Dia Kirpalani, Senior Manager of Financial Planning at Personal FN.