BALANCE TRANSFER FOR INTEREST RELIEF

What are the costs involved? In order to induce customers, banks offer low rate of interest or sometime even zero interest on the balance transfer for a specified period. You have to remember that the attractive rates (zero or low rates) are valid for only an introductory period of 3 to 6 months. After that, the bank will start charging you the normal rate of interest. A processing fee is also levied by banks which can be in the range of 2 to 5 per cent of the total amount.

Let us take the example of bank ABC, which offers two plans for the balance of transfer: 1) Transfer at zero interest rate for three months, 2.95 per cent interest after the third month and two per cent processing fee or `199, whichever is higher. 2) Transfer at 0.75 per cent for six months, 2.95 per cent interest after the sixth month and one per cent processing fee or `100 whichever is higher. What is the process?

Inform the credit card company to whom you want your debt to be transferred to.

Fill in the form provided by them with details pertaining to your old credit card along with a copy of your latest credit card bill and submit it.

Within 7 to 10 days, the credit card company will send you a demand draft (DD), which will have the name of your old credit card issuer on it. After having submitted this DD to your old credit card company, your outstanding debt gets cleared with them and the same will be transferred to the new credit card issuer. Points to note

Balance of transfer processing takes 7 to 10 working days. While you are waiting for the balance of transfer to get through, there are chances that you miss the due date for payment on your old card. That means you haven’t paid the minimum amount, which could be considered as a default and can affect your credit report. So make sure that you pay the minimum due amount when the balance of transfer is getting processed.

Keep track of the period for which you enjoy low interest or zero interest and make sure that you pay off your dues within that time frame

Any purchases and expenses on the card on which you have opted for the balance of transfer will not fall under the low or zero interest purview.

In order to make the most of the balance of transfer facility, make sure you make the maximum payment during the low interest or interest free period so that your finances are not impacted when the interest rate kicks in.

Also, more importantly, you need to note that moving from one card to another provides you with a temporary interest relief. Take advantage of this and reduce your dues. However, you need to remember that the credit card company is betting on you for not clearing the debts in time, because that is when they start making money. Adhil Shetty is CEO of

BankBazaar.com