How can I reduce paying huge interests on my credit card?
What is Credit Card Balance Transfer?
How do I get out of my credit card debts?
There are lot of credit card holders but unfortunately not many of them know the features and pits and falls of using a credit card.
As many Credit card companies give their customers a huge sum of credit limit the temptations to spend without money increases. Since the credit cards are delivered with a label of 40 days to 55 days interest free usage customers are often tempted to spend and increase their debts if not planned properly. When the customer cannot pay the Total Credit Outstanding they fall prey to the huge interest rates of Credit card companies.
The credit card interest rates are as high ranging around 35% to 42%. Compare that to a personal loan where interest rates lie just around 13% to 24%. So how do you get out of the huge interest rates of Credit cards? The best way is to apply for a personal loan and pay your Credit card bills when you have a huge sum to be paid to Credit cards.
But not everyone is eligible for a Personal Loan especially when you don't maintain Bank accounts properly or/and already have number of loans. But when getting a Personal loan is not possible or the card outstanding is not so high to apply for a personal loan and you have two or more credit cards Balance Transfer is the best option.
Below is the step-by-step procedure to apply for a Balance Transfer (BT):
1) First list down the credit card outstanding on all your cards. For example: Credit Card “A” – Rs.24500 and Credit Card “B” – Rs. 12500 and Credit Card “C” – Rs.1800 and Credit Card “D” – Rs.200.
2) Plan clearly how much amount you will have to pay your credit card bills. Lets say if you can pay Rs. 5000 and for the above credit card outstanding lets pay wisely.
3) Pay Rs.200 on your credit card “D” outstanding immediately. Check the Credit card limit of your card “D”. Typically you may have 70% to 80% of your credit card limit for BT.
4) Pay Rs.1800 on your Credit Card “C”. Now the balance outstanding of your card will look like below: Credit Card “A” – Rs.24500 and Credit Card “B” – Rs. 12500. Together you have Rs. 37000 as outstanding where as you can pay Rs.3000 (Rs.5000 you had minus Rs.200 and Rs.1800 paid for Credit Card “D” and “C” respectively).
5) Plan your repayment capacities. Credit card companies offer BT options as below:
· 0% interest rate Balance Transfer with maximum of 2.5% processing fee for a period of 90 days
· 0.99% interest rate Balance Transfer with maximum of 2.5% processing fee
* - These rates and duration vary for each card company
6) Based upon your repayment capacity you can chose the plan from above. And most banks do not levy additional charges for pre-closure of Balance Transfer.
7) Let’s say you can pay Rs.10000 every month then 0% interest rate for 90 days is the best option for you. Lets apply for Rs. 12500 for your Credit Card “B” and Rs.21500 for your credit card “A”. You can pay Rs.3000(you already have) for your credit card “A”.
8) Apply for a BT as planned above through online (if you have online access to your Credit card account) or call your customer care by phone and apply for BT. You may be required to provide your Credit card end date of your other card along with the card number to which Balance Transfer is applied. Read the “Terms & Conditions” document clearly. If applied through phone the customer care executive will clearly explain the details.
9) Within 5 days to 15 days you will receive a DD/Cashier order to your mailing address drawn in favor of your Credit Card as applied. This DD/Cashier Order will mostly be Pay at Par so you wont have to worry about the city you reside.
10) Drop these DD/Cashier Order in the required Credit Card Payment channels well at least a week before the last day to avoid any issues. ( In this case drop the payment by 84th day).
11) In both the cases you have to make the minimum repayment amount (5% of card outstanding) each month to avoid financial charges.
12) In this case, before the 90th day pay make sure you have paid your BT outstanding including the processing fee and service charges applied. Otherwise you will be again levied with huge financial charges.
Tips for Hassle-Free BT Usage:
1) Don't make any purchases on your credit card when you have a BT running in your card as most banks apply financial charges on using your card in BT phase.
2) All payments made will be for your BT amount. Only after 100% clearance of BT amount your payments ill be credit to other transactions you have made. So BE CAUTIOUS.
3) Make the minimum payments promptly again to avoid financial charges.
4) Close your Balance Transfer outstanding within the stipulated time else you will be charged with high interest rates for the entire BT period. For example if you make a payment on 92nd day of your 90 days 0% interest BT, interest will be levied for the entire 92 day period.
5) If you feel you cannot make entire payment before the BT period apply for another BT from any other credit card to the bank which you have already have a BT running. Some banks ask for other card bank statement to approve BT. In such a case your BT request may not get approved.
6) All BT approvals are at the sole discretion of your credit card companies.
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