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Research: The ABCs of the Credit Card Balance Transfer Process -

The concept of balance transfers is fast becoming central to the workings of credit card companies. Though the term also refers to the transfer of balance between accounts such as the savings account or the fixed deposits accounts, the term is most used these days to signify the transfers of credit balances from one credit card Company to the next. Most credit card companies offer their customers the facility to transfer credit balance. However, many people are unaware of the benefits of the scheme and fail to avail of it.

Balance transfers are most useful to those who have larger amount of credit to pay back to the Credit card Companies. With time, the amount seems more likely to increase than decrease because of the high interest rates. At the time of applying for a credit card, a person may have chosen a particular company for a variety of reasons; a low interest rate may have been one of them. But market fluctuations mean that interest rates are seldom fixed and the company selected may have, over time increased their interest rates. However, Credit card companies cannot increase interest rates unreasonably. The increase has to submit to overseer regulations regarding interest rates. So, different credit card companies may have different interest rates, but the chances are that these differences are marginal.

The interest rate is not the only consideration one must factor in while choosing a credit card company. There are various pay back schemes offered by credit card companies that make paying back the large sums of money easier. These may include a period during which the interest rate drops, credit card rewards that may ease up the sum to be paid etc. It is a sum total of all these factors that makes one credit card Company more customer friendly than the other.

The use of Balance Transfers

A customer may identify a better scheme in another credit card company. Like mentioned above this scheme may involve lower interest and more time to pay the money back in. The balance transfer facility allows customer to change their accounts from one credit card Company to the next, taking with the credit balance from the previous company. The customer will have to follow the regulations of the new credit card company - their pay back policies, their interest rates etc. In effect, the relationship with the previous credit card company is terminated. The new credit card company will create an account for the customer and insert the customers existing credit balance. The credit limit may or may not change - subject to other considerations.

Credit card Companies are buying into this scheme as it is very attractive way of attracting new customers. Most schemes in truth are fundamentally similar. The projected differences are usually marginal. However, one scheme may suit a customer more than others do. The Companies also offer what is known as a 'grace period' - a small period of time during which the interest rate is lowered. This is specially created to benefit the new customers. The grace period is usually for the first few weeks of joining the new company.