The banks and lenders have been pretty aggressive in pushing their balance transfer schemes, mainly to allure customers towards their company and increase their user data base. This is a great opportunity for individuals to pay their debts off at a significantly lower cost. While it all seems hunky dory in the beginning in those kotak balance transfer Ads and Axis Balance transfer Ads, it is essential to calculate all the risks which may come with it. Here are some pros and Cons of credit balance transfer-
Pros of Credit Card Balance Transfer
Taking advantage of having a lower credit card interest rate – It is highly likely that your current bank’s credit rate interest would be higher than the one which will be offered to you by some other lender. The low rate of interest would impact your debt more and you would have to pay less amount than what were you paying earlier.
New credit card with new benefits- May be your current credit card have strict policies like high late penalty fees, short grace period. Your new credit may not have these strict policies, and so you can enjoy less burden regarding repayments and you can close your old credit card account.
Consolidating your multiple credit cards- If you have a high credit card limit, you can club all your credit cards into one credit card and simplify the process of paying only a single bill, instead of paying multiple bills on multiple due dates.
Cons of Credit Card Balance Transfer
You could go backtrack and end up with a high interest rate- It is very essential to check all the terms and conditions of a credit card company. Many people see a promotion offer and think that the mentioned low rate of interest will remain constant throughout their membership which is not true. After a period of time the credit card company would charge the nominal rate which would be mentioned in their policy, it may be of 6 months or a year that is also you need to look out for.
Balance transfers expense also needs to be taken into the account- Generally the banks will provide a 0% balance transfer offer, but that is not the case always, so that is something you need to clear first. If you are charged a balance transfer fee then you need to calculate the rate of interest which would be charged by the new credit card company and see if it is more beneficial to you in anyway or not.
Balance transfer might hurt your credit score- Before opening a new credit card account, take into account the number of credit card which has been opened under your name, as opening multiple credit card account would hurt your credit score. Apart from that you also need to take into account that your credit balance is not more than the credit card limit of your new card, as that will decrease your credit score too, but the lost points can be recovered in a few months’ time.
So in conclusion you need to factor in all the points which I have mentioned and take the decision accordingly.