It’s a given that paying off debt is difficult. What’s worse is keeping track of a bunch of them, considering each may vary with different factors such as its payment package, fees, and interest rates.
This is one of the many reasons why trimming down one’s finances is ideal and necessary. Here’s when the balance transfer comes into place.
Balance transfer cards often offer 0% interest rates for a set period, which makes it an appealing option if you’re paying high interest on lots of different cards.
Here are the rates currently being offered by banks for 6-month and 12-month balance transfers:
|6-month balance transfer||12-month balance transfer|
||0% p.a + 1.5% fee||0% p.a + 4.5% fee|
||0% p.a + 1.58% fee
(for new to bank customers)
|0% p.a + 5.5% fee|
||0% p.a + 2.5% fee||4.98% p.a. + 0% fee|
||0% p.a + 2.5% fee||0% p.a + 4.28% fee
||0% p.a + 2.5% fee||0% p.a + 4.5% fee|
||0% p.a + 2.5% fee||4.98% p.a. + 0% fee|
The lowest balance transfer rate for a tenure of six months is offered by Standard Chartered, at 0% p.a. with a 1.5% processing fee should you apply online. This applies across all existing customers of Standard Chartered who have a credit card with the bank.
Second to that is Citibank, which is offering a fee of 1.58%, but only for those who do not have any existing relationship with the bank. They offer 0% p.a.+ 1.58% processing fee. If you are already a Citibank customer, it becomes a 0% p.a.+ 2.5% processing fee.
- One-time processing fee. For balance transfers, banks usually charge a one-time processing fee of between 1.5% to 4.5% of your approved loan amount.
- Transfer rate. Banks in Singapore usually offer a 0% transfer rate for balance transfers (as long as you make full repayment within the agreed tenure).
- Length of the repayment period. Balance transfer repayment periods in Singapore can range from 3 to 24 months.
How does a balance transfer work?
From the word itself, it is when one decides to move an outstanding debt on one credit card to another- usually a new one. Credit card balance transfers are usually utilized by consumers who would want to move the amount they owe to a credit card with a significantly lower promotional interest rate and better benefits.
The process of taking transfers may vary but it usually begins with applying for a card. The one with an introductory 0% APR offers on balance transfers. People can use an offer on a card they already own nonetheless.
Take note that you can only enjoy the benefits of a balance transfer if you have a good repayment plan in place and stick to it. Otherwise, the promotional interest rate-free period can be revoked and interest can soar even before the end of the repayment period, putting you back in the same place as you were before.
Benefits & Drawbacks
- Credit cards offer flexibility over how much you pay back each month (always be sure to meet the minimum payments, though)
- 0% or low-interest rates could be available to you.
- Transferring a balance from a higher-interest credit card to a lower-interest one can be a great way to save money and get out of debt faster.
- The amount you can borrow will likely be less than with a loan
- Availing for a credit card may hurt your credit score in the short-term but could improve it if you keep up with repayments
- You will need to pay a transfer fee which will be a percentage of the money you’re moving over to the new card.
- Depending on the deal and the fees, transferring a balance may not save you enough money to be worth the trouble.
Keep in mind that transferring your balance should aid you in getting you out of debt immediately.
How to Apply?
To successfully avail or apply for a balance transfer, you must be:
- At least 21 years old
- A Singapore citizen or Permanent Resident: minimum annual income of S$30,000
- For foreigners: must have a minimum annual income of S$42,000. Some banks also may require you to hold a Singapore Employment Pass.
- You might be required to own a credit card or bank account with the bank that you are applying for the balance transfer with.
A personal loan often offers a lower interest rate compared to credit cards. It is considered a good tool to utilize for credit card outstanding balance consolidation because it can be stretched over a longer tenure at a much lower monthly repayment amount. This would ease cash flow on a monthly basis.
Moreover, while balance transfer allows you to transfer either the outstanding balance on your credit card to another credit card, personal loans are, as the name implies, a simple loan given out for personal use.
|Balance Transfer||Personal Loan|
|Interest Rate||0%||Banks :3.88% to 7%
Moneylenders: 4% per month
|Processing period||Can be approved immediately for online applications||Banks: Days to weeks
Moneylenders: Within an hour
|Processing fee||1.5% to 5.5%||Banks: 1% to 2%
Moneylenders: a fee not exceeding 10% of the principal of the loan
|Repayment Amount||Varies, but the minimum 1% to 3% of the outstanding amount per month||Fixed amount per month throughout the term|
|Repayment Term||3 to 18 months||Banks: 1 to 5 years
Moneylenders: 6 to 12 months
|Usage||Primarily to pay off credit cards and personal loans that are incurring high-interest rates, but can also be used for other purposes||Can be used for any purpose. This includes paying off your outstanding credit cards, used as an education fund, for medical purposes, even for a wedding.|
|Criteria||Requires proof of income and credit score will be assessed. Up to 95% of the credit limit on your credit card will be allowed. Takes into account all other credit on you, where if combined, a total of up to 12 months of your total income is allowed||Banks: Requires proof of income and credit score will be assessed.
Moneylenders: Borrowers can apply with low credit scores as long as there’s proof of income
For credit card balance transfers, you are expected to only repay the bulk of the amount you borrowed by the end of your repayment term. You need to only pay a small amount of the amount you borrowed monthly prior to the end of the repayment term.
For example, if your balance transfer is for 6 months, your outstanding amount is $10,000, and your minimum payment is $100, then for the first 5 months you only need to pay $100 each, but on the 6th month, you need to repay the remaining amount.
Take note that moneylenders, like Raffles Credit, in Singapore must prioritize these:
1. The approval of the application must be fast, approximately within an hour only;
2. Loan amount is up to 6 times the borrowers’ monthly salary;
3. Interest rates are up to 4% monthly;
4. On charges and fees, late payment fees should not exceed $60 for each month of late repayment. When the loan is granted, the fee should not exceed 10% of the principal loan. Also, the repayment should always be up to 12 months, subject to the terms and conditions of the agreement
Both balance transfer and personal loan can help you pay your debt within an instant, however, you must remember that while they are similar in nature, they will require you to have proof of income upon application. As it is urged, your choice should vary on your capability to repay the amount borrowed.
Raffles Credit, as one of the best lenders around, is committed to pushing the boundaries of what it means to be in the business of lending money to clients.
With easier application processes and quicker personal loan approvals, it’s assured we are constantly refining our approaches to make it easier for anyone who needs financial assistance to apply. We’re also constantly trying to do more, at faster speeds, knowing that time is of the essence.