Balance Transferring on credit cards is a method of paying the credit balance of one card by using another card. For example, if you have a credit card X with credit payable of $ 60, the concept of balance transfer would facilitate us to use, let’s say, credit card ‘Y’ to pay off the debts of credit card ’X’. Hence the revised payable would still be $60 payable to company ‘Y’ over the stipulated period.

The Importance

This is important to people who have maxed out their credit cards and are unable to pay their dues. The consumer can transfer off their credit from one card to another at zero balance transfer charges. It is essential to understand that the transfer of credit is not equivalent to repaying the credit. It allows them to have a temporary breather from the payment of dues. The balance transfer is also available on loans for cars, appliances etc.

Zero Balance Transfer Credit Cards

The credit card companies charge an interest and a transfer fee to the customer for the transfer of balance. However, due to increased competition in the business of credit cards, there is an option of balance transfer credit cards at 0%. The companies do not charge the customer the transfer fee, initially for 60 days from the day the account is opened. Post 60 days, the companies charge a 3% or $10(the higher amount) transfer fee. The companies charge 0-5% teaser Annual Percentage Rate(APR), however, this might shoot up to 12-18% after a set period.

Credit Score

A good credit score is required for Balance Transfer Credit Card. However, a continuous balance transfer from one card to another will drastically damage credit scores. This might affect the ability of a person to get credit/loans in the future.

Warnings

Though the balance transfer is interest-free, the purchase of the new cards could bear interest. According to Credit Card of 2009, the issuers would debit the higher interest rates first, between the new purchases and the balance transfer. So, it is recommended to avoid purchases with the new card.