Credit Card Balance Transfer Case Study

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1. Explain credit card balance transfer. Is it available in India? Mention three advantages and three disadvantages of credit card balance transfer. How is it different from EMI on credit card?

Credit card balance transfer refers to the process of transferring the outstanding credit balance of one credit card to another. This facilitates the convenience where you can pay the dues at a minimum interest of 0-2% for a specific period.

The advantage of transferring these dues, even if limited, are lucrative. You do not have to pay an additional interest on the dues for a specific duration which ranges over 3-12 months. Lower interest rate means a lower GST. However, this is applicable only if you pay the entire dues withing the intrest free window allocated to you.

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Even if Credit card balance transfer is a boon in disguise, many customers perfer taking it slow when it comes to repaying the dues on the credit cards.

It always has to be a different bank. If you are an ICICI customer, you cannot transfer your credit balance from one card to another of the former bank.
Maximum upper limit of transfer is limted to 75% of the entire card capacity. Moreover, you need to have a transaction history of 6-12 months with an individual bank to become eligible for the transfer again.
Processing fees are usually higher. For most banks it is 1.7% of the transferred amount or 199 INR, whichever is higher. To put it in simple terms, a higher balance transfer attracts a higher processing fee.

One might wonder, how is credit card balance transfer different from EMIs.

EMIs are calculated based on the reducing method formula. The entire principle attracts an interest which is calculated as a due which needs to be paid off at the end of each month. The borrower usually has a clear picture of the entire payment cycle along with the amount

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