Tips for Choosing the Best Balance Transfer Credit Cards

Editorial Team

Dealing credit card debt can be a challenge due to high-interest rates that are levied on outstanding card payments. One way to deal with this is balance transfer credit cards. These unique cards allow for moving the outstanding balance from other cards to another with lower interest rates. This can reduce the interest to be paid and offer an effective way to reduce debt. 

This article is a comprehensive guide designed to help navigate the landscape of balance transfer credit cards, understand their benefits, and ultimately choose the best card for particular needs. 

Read on. 

Getting Into the Details of Balance Transfer Credit Cards

The best balance transfer credit cards essentially allow a holder to move debt from one or more credit cards to another card, typically with a lower interest rate. 

This can be particularly useful for people dealing with high-interest credit card debt.

How Balance Transfer Credit Cards Work: 

These cards often come with a promotional offer with a low or zero interest rate for a specific period, usually 6 to 18 months. 

This promotional period allows people to pay down debt faster as more of the payment goes towards the principal, not interest.

Factors to Consider When Choosing the Best Credit Card for Balance Transfer

In the journey to find the best balance transfer credit cards, consider the following factors:

  • Interest Rates: Understand both the promotional and post-promotional interest rates. The promotional rate should be significantly lower than what someone is currently paying. But also, be aware of the rate that will be charged after the promotional period ends.
  • Balance Transfer Fees: These are fees charged for the balance transfer process, typically a percentage of the amount transferred. Always factor in this cost when considering a balance transfer.
  • Credit Limit: This refers to the maximum amount a card issuer allows someone to borrow. The credit limit of the balance transfer card should be high enough to accommodate the debt they want to transfer.
  • Eligibility Requirements: The best balance transfer credit cards often require a good to excellent CIBIL score. Check the eligibility requirements before deciding to apply for a credit card online.
  • Additional Benefits: Some cards may offer rewards, cashback, or other benefits. While these should not be the primary reason for choosing a balance transfer card, they could be a tiebreaker if undecided between two similar cards.

Comparing Different Balance Transfer Credit Cards

An essential step in finding the best balance transfer credit cards is comparing options.

Here’s how:

  • Importance of Thorough Research: Invest time researching and comparing different cards. This can ensure a card tailored to a financial situation and repayment capability.
  • Tips for Comparing Different Credit Cards: Look at various aspects like promotional interest rate, post-promotional rate, balance transfer fees, and additional benefits. Consider repayment strategy and choose a card whose promotional period aligns with it.
  • Resources for Credit Card Comparisons: Numerous online platforms offer credit card comparisons, which can help streamline research. Filter cards based on various parameters like interest rate, balance transfer fee, etc.

Avoiding Common Mistakes in Choosing a Balance Transfer Card

While balance transfer cards can be a lifeline in managing high-interest debt, there are common pitfalls to be aware of:

  • Mistake 1: Ignoring the Post-Promotional Interest Rate: If an individual is unable to pay off the transferred balance during the promotional period, the remaining balance will be subject to the post-promotional interest rate, which can be quite high. Be sure to consider this factor when choosing a card.
  • Mistake 2: Overlooking Balance Transfer Fees: These fees can be up to 5% of the transferred amount. For example, transferring Rs 50,000 with a 5% fee would cost an additional Rs 2,500. Always take this into account.
  • Mistake 3: Not Considering Repayment Capacity: Consider how much can be reasonably paid monthly. This will help gauge if the debt can be cleared within the promotional period.

Case Study: Successful Balance Transfer Strategy

Let’s explore a case study of Amit, a 35-year-old IT professional from Bangalore to bring these concepts to life.

Amit was struggling with debt on two high-interest credit cards totalling Rs 1 lakh. Despite regular payments, he found it hard to make because of high-interest rates. 

Amit decided to apply for a credit card online for a balance transfer card with a promotional interest rate of 0% for 12 months and a 2% balance transfer fee. The card had sufficient credit limit to accommodate his debt, and his CIBIL score met the eligibility criteria.

By transferring his balances, Amit consolidated his debt and saved significantly on interest. He formulated a repayment plan and successfully cleared his debt within the promotional period, saving himself from the post-promotional high-interest rate.

Wrapping Up

Choosing the best balance transfer credit cards can be an effective strategy to manage and pay down high-interest credit card debt. 

By considering factors such as interest rates, balance transfer fees, credit limits, eligibility requirements, and additional benefits, a card tailored to specific financial needs can be found.

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