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Research: Chasing the better scheme - Balance Transfers -

A balance transfer is one which allows the transfer of money of credit between two accounts. A Balance transfer is also a facility provided by banks and other financial agencies to its customers. The general regulations of this facility are fundamentally similar across the various financial institutions. However, each agency can have its own additional specifications.

The balance transfer is a relatively new concept in banking. The most common type of balance transfers are in the credit card sector. There are numerous types of balance transfer, which differ from one another by through levels of complexity. The simplest version of a balance transfer is the similar account balance transfer. This involves a transfer of 'balance' between two accounts of a similar type at the same or different bank. For example moving available balance from one savings account to another savings account can be termed balance transfer. A variant of this type is the transfer of balance between two accounts that are different in nature. Example: Transferring balance from a savings account to fixed deposits account. In short, the simplest version of Balance Transfer is when money is moved around between two accounts.

A more recently popular version is the credit card balance transfer. This has several advantages for the customers as well as the bankers. First, a credit card balance transfer refers to the moving of credit balance from one type of credit card service to another. This essential means, the customer is moving to a new credit card company.

In the new credit card company, the customer can retain the same credit balance but will have to follow the regulations of the new credit card Company. In fact, customers transfer credit balances from one credit card Company to another for precisely this reason. The interest rates on credit card amounts are high. But there may be a difference between interest rates among the different credit cards companies. So, if a customer identifies a better pay back scheme in another Credit card company, he/she is free to transfer their credit balances to the new Company. This is a worthwhile operation.

Credit card companies even have a certain time period, called the 'Grace Period', during which the interest rates are even lower. Some people have even devised a system of moving from one credit card Company to the next, managing to catch and utilize the grace period constantly. There fore they land up getting considerably lowered interest rates.

However, this frequent hop, skip and jump may not look to good on a credit History. As far as the companies are concerned, this is a scheme with which they attract new customers. With the growing numbers of banks and credit card companies, the executives are under constant pressure to come up with new schemes to retain its customers and get new ones. With a system like balance transfers, the company with the best optimal policy wins. The credit companies may charge the customer a small exit fee when he or she leaves the company. However, this is almost non existent compared to the large amounts one can save up on transferring to a company with lower interest rates.