Credit cards can ease your financial woes if you are smart with your credit card debts. You can use credit cards to get instant funds for large purchases and payments.
However, if you fail to pay the credit card bills on time, the outstanding balance can bring high-interest charges on the balance amount.
Credit cardholders who make it a regular habit to not pay their credit card bills on time can end up accumulating an enormous amount on their credit card bill.
Cardholders can do a credit card balance check from time to time to avoid this.
Cardholders who do not pay their credit card bills on time can find a huge dent in their credit score, making it difficult to get loans in the future.
Difference Between Credit Card Balance and Credit Card Limit
People who have recently got their first credit card may get confused between the terms credit card balance and credit card limit.
A credit card balance is the entire balance amount the cardholder has to pay on his credit card. When the cardholder does not pay the credit card bill fully or makes purchases on his credit card, the credit card balance keeps increasing. It decreases when the cardholder makes a repayment.
The credit card limit is the spending limit set by the credit card issuer on the card. It is the amount of money the cardholder can spend on purchases or bills using the credit card.
Balance Transfer on a Credit Card
To deal with a mounting balance on the credit card, credit cardholders have the option of transferring the credit card balance to another credit card. Several credit card issuers in India offer customers the facility of balance transfer on a credit card as it attracts new customers.
Usually, credit card issuers give an introductory interest-free period to welcome new customers. The interest-free period could last between six or 12 months or even more.
When the cardholder transfers his credit card balance from another card to this new card, he can get relief from the increasing interest on his credit card debt through the interest-free period on his new card.
The interest-free period is a limited-time offer and once this period ends, the cardholder has to pay the regular interest on the credit card balance on his new credit card.
The interest-free period acts as a buffer period for the cardholder. The cardholder can arrange for finances to pay off the credit card debt in this relief period.
Benefits of Doing a Credit Card Balance Transfer
An individual may have multiple credit cards and may not be able to keep track of the billing cycle of each card. In such a case, he would end up paying late fees and interest charges on late bill payments. Such cardholders are advised to get their balance transferred to a single credit card to make payment tracking convenient. It will reduce the tracking and bill payment efforts to a single card.
- A credit card balance transfer reduces the interest applicable on the balance amount as the interest charged on a balance transfer is often low.
- The documentation involved in balance transfer is minimum.
- A balance transfer is a quick, convenient, and easy process.
- Cardholders can transfer debts from more than one credit card to the new credit card.
- Some credit card issuers offer zero interest rate charges on the transferred balance for a fixed period. However, the other purchases made on the card are charged as per the regular interest rates.
Customers should note that the credit card issuers charge a balance transfer fee on the outstanding balance. The fee is directly proportional to the outstanding balance amount.
How Knowing Your Balance Can Help
Customers can benefit in multiple ways by keeping a check on their credit card balance.
- Timely checks on the credit card balance can help you keep on track with the bill payments. It helps you stay updated about the outstanding amount on your credit card, which can help you avoid late repayments.
- A cardholder who checks his credit card balance regularly can check and report wrong billing or unauthorized transactions on his card.
- Checking the balance also tells the cardholder how much he owes to the card issuer and how much of the credit limit he is still left with. The cardholder can plan his expenses accordingly.
Regular balance checks can help the cardholder decide if he needs to get a balance transfer on his credit card due to increasing interest charges. A balance transfer can buy him crucial interest-free time in which he can arrange for the funds to make the repayment.