How does the balance transfer facility work on credit cards, and how can you avail of it? | Mint

Some people carry forward outstanding on multiple credit cards, which is time consuming to manage. They also pay a high interest rate of up to 3.75% per month on credit card outstanding. 

What if these people could consolidate the outstanding debt on multiple credit cards into a single credit card for ease of management? What if they could save on the high interest outgo amount by transferring it to a credit card with a lower monthly interest rate? Yes, the credit card balance transfer (BT) facility allows you to do that. In this article, we will understand what is balance transfer in credit cards and the steps to do it.

What is the balance transfer facility in credit cards?

The balance transfer facility allows a credit cardholder to transfer their credit card outstanding on one credit card to another credit card. For example, an individual holds an ICICI Bank credit card with an outstanding of Rs. 1 lakh and an SBI credit card with a Rs. 2 lakh credit limit and nil outstanding. Using the BT facility, the individual can transfer the ICICI Bank credit card Rs. 1 lakh outstanding to the SBI credit card.

The balance transfer facility allows the credit cardholder to convert the outstanding lumpsum amount into easy EMIs of 3 to 48 months. For example, in the above scenario, using the BT facility, the individual can convert the ICICI Bank credit card Rs. 1 lakh outstanding into a SBI credit card 180 days plan.

The BT facility usually comes at a lower monthly interest rate. Continuing with the above example, as per the SBI Card website, the BT conversion to an SBI credit card can happen at an interest rate of 1.70% per month or 20.40% per annum. So, this interest rate is much lower than the up to 3.75% per month interest rate or 45% per annum interest rate that most banks charge on credit card outstanding.

How to avail of the BT facility?

There are various ways in which an individual can avail of the BT facility. Some of these include the following:

1. Log into your credit card account on the bank website or App. For example, SBI credit cardholders can log in to the SBI Card website. Click the “Benefits” link on the left hand navigation and select “Balance Transfer”. Enter the details and confirm to book BT instantly.
2. By sending an SMS. For example, SBI credit cardholders can SMS BT to 56767
3. By calling the bank customer care. For example, SBI credit cardholders can call the SBI Card helpline at 39 02 02 02 (prefix local STD code) or 1860 180 1290

To avail of the BT facility, you must enter the credit card details from where you want to transfer the outstanding. For example, on the SBI Card website, the individual will have to enter the following details:

1. ICICI Bank credit card number from where the outstanding balance has to be transferred to SBI credit card
2. The BT transfer amount
3. The SBI credit card BT plan that you want to avail of

Banks offer different plans for BT transfer. For example, SBI Card offers two BT plans as follows.

1. BT plan for 60 days tenure with 0% interest rate per month. The processing fee is 2% of the BT amount or Rs. 99, whichever is higher.
2. BT plans for 180 days tenure with an interest rate of 1.7% per month or 20.40% per annum. There is no processing fee for this plan.

The bank transfers the BT amount to the cardholder’s other bank credit card account through NEFT. The transfer usually happens in 2-3 working days. In our example, SBI Card will transfer the Rs. 1 lakh BT amount to the cardholder’s ICICI Bank credit card account through NEFT.

In the case of BT facility availed of in the form of EMIs, the monthly EMI amount will be billed in the monthly billing statement from the next billing cycle. The EMI amount will be a part of the “Minimum Amount Due (MAD)”.

What is the maximum amount that you can avail for BT?

Banks specify the minimum and maximum amount you can avail of under the BT transfer facility. For example, SBI Card offers a BT facility for a minimum of Rs. 5,000, while for ICICI Bank, it is Rs. 15,000. The bank specifies the maximum amount that can be availed under the BT facility, usually a percentage of the credit card limit.

For example, with SBI Card, the maximum BT amount is 75% of the available credit limit on the card on which the BT is being availed. In the case of ICICI Bank, the BT facility can be availed for up to Rs. 3 lakhs. If the available BT limit is exhausted, more amounts can be transferred later as and when the existing EMIs are paid and the credit limit is freed up. The other option is to ask the bank for a credit limit enhancement. An increase in credit limit creates more room for availing of additional BT amount.

A credit cardholder can transfer the outstanding from multiple credit cards to a single credit card to consolidate debt in a single credit card. It is subject to the available credit limit on the credit card to which the balance is being transferred.

Ease lumpsum payment burden with easy EMIs with a balance transfer

The balance transfer facility helps credit cardholders ease their lumpsum credit card outstanding into easy on-the-pocket EMIs. The BT facility also comes with a lower monthly interest rate. You can consolidate debt from multiple credit cards into a single credit card for ease of management. Thus, the balance transfer facility offers you a number of debt management benefits along with the much-needed peace of mind.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.