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September 10, 2024

Credit Card Balance Transfer: What is it and How it Works?

Hefty credit card balances can be a financial strain, especially when high interest rates keep increasing your debt. In such a situation, juggling multiple dues each month can be stressful, and it might seem like you’re not progressing in reducing your balance.

A balance transfer credit card offers a means to regain control over your finances by shifting your focus from daunting interest payments to directly tackling the core of your debt. Know how a balance transfer can become the saviour of your financial worries.

What is a balance transfer credit card?

A balance transfer involves transferring the amount you owe from one card to another. You pay off the balance on the original card(s) and then carry the same amount on the new card. A key advantage of credit card transfer is that the new card may offer a lower interest rate and reduce the loan repayment cost.

However, not all financial institutions offer the option of balance transfers. Hence, it is important to seek a bank that provides this feature.

How to transfer a credit card balance?

Here’s the complete process for how to transfer a credit card balance to another card:

  1. Check your current outstanding dues

    Review your statement to determine your outstanding balance, interest rates, and penalty charges. For example, let’s say you have an outstanding balance of Rs. 1,00,000 with an annual interest rate of 24%.

  2. Opt for a lower interest rate

    Look for a new credit card that offers a lower or 0% interest rate for balance transfers. For instance, you have found a card that offers 0% interest for the first 12 months.

  3. Note down the credit limit

    Ensure the new credit card has a high credit limit to cover your existing debt. Verify that the limit meets or exceeds your outstanding balance of Rs. 1,00,000.

  4. Calculate balance transfer fees

    Evaluate the processing fees associated with the new card. For example, if the card charges a 2% balance transfer fee, calculate whether this fee makes the transfer worthwhile.

  5. Apply for a new credit card

    Complete and submit your application for the new card using the balance transfer option. Include all necessary forms and documents as required by the new issuer.

  6. Request the balance transfer

    Once your application is approved, request a balance transfer from your new credit card issuer, specifying that you want to transfer the Rs. 1,00,000 balance from your old card.

  7. Clear your debt

    Once you complete the transfer, your previous balance will be set off, and you will now owe your dues on the new credit card.

Important points to remember

Before entering into any agreement about transferring credit card balances, it is imperative to understand the following:

  1. Impact on credit limit

    When you transfer your balance to a new card, your available credit limit is reduced by the same amount. For instance, if you have a limit of Rs. 85,000 and you transfer Rs. 50,000, your available credit limit for new credit transactions drops to Rs. 35,000. This reduction can influence your credit utilisation ratio, an important factor in your credit score.

  2. Interest rates on new purchases

    When using a credit card transfer, the low or zero interest rates only apply to the transferred balance. New purchases with the card usually have the standard interest rates set by the card issuer.

  3. Eligibility requirements

    Balance transfer credit cards are available to customers who have had a credit card with the bank for at least a year or meet specific criteria. This rule helps prevent people from frequently switching banks just to get lower interest rates. Instead, it encourages a stable, long-term relationship with the bank that issues the credit card.

  4. Processing fee

    The credit issuer charges this fee for transferring your existing balance to a new card. While this cost might seem minor, it significantly determines whether the transfer is a wise financial move.

  5. Promotional period

    The primary benefit of a credit card transfer is the low or zero interest rate offered during this period. Thus, clearing your dues within this timeframe is crucial to avoid reverting to the standard, often higher, interest rates. Delaying payments beyond this period could increase financial pressure because of the high interest rate incurred.

  6. Credit card usage

    Suppose you still have credit available after a balance transfer. In that case, avoiding using your credit card for new purchases is generally a good practice until you fully pay off the transferred balance and any subsequent charges. This strategy helps maintain financial discipline and prevents accumulating additional debt.


While a credit card balance transfer can be a powerful tool for debt consolidation and interest cost reduction, it's essential to remain cautious. Understanding the new credit card's terms and conditions beforehand can help you manage your spending and prevent further debt accumulation.

It's essential to plan and pay off the transferred debt before the promotional period ends, as any remaining balance will accrue interest at the regular rate. There are numerous credit card benefits, but using it wisely is important in maintaining good financial health.

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