What Is A Balance Transfer Credit Card? A Comprehensive Guide To Benefits, Fees, And Strategies In Singapore
September 25, 2023
Credit card and other unsecured loan debts can be difficult to repay, especially when interest charges compound over time. A balance transfer in Singapore could solve your ever-growing debt load, but you must utilise it wisely.
So what is a balance transfer credit card, and what are its benefits? Read through this comprehensive guide to understand more about balance transfers and strategies in Singapore.
Introduction To Balance Transfers In Singapore
Let us first understand the definition of balance transfers and how to use them.
A balance transfer is a brief, unsecured loan typically available on a credit line or credit card account. It has a 0% or low interest rate, which you can use in taking a loan between three and 12 months.
You can do so by transferring the amount remaining on the credit card to a different line of credit or by contributing a portion of the remaining credit card threshold to your savings account. You will receive a bank account deposit for the sum you borrow for the balance transfer.
Pros Of A Balance Transfer
The benefits of balance transfers include the following:
When transferring balances, you have the opportunity to combine your current debt. You may combine all bills onto a single balance transfer card. The number of monthly payments will decrease as a result of this.
A Transfer Rate Of 0%
You can transfer the entire balance on your account for a transfer rate of 0% with only a little processing fees. With this, you will save money on interest since the promotional 0% APR is set for a specific time.
Reduction In Credit Utilisation
Your credit score can rise thanks to a debt transfer because it lowers your credit use rate. A lesser credit utilisation rate indicates good management, which might boost a credit score.
You Obtain A Quick Loan
In Singapore, most transfers have six to twelve months payment terms. It enables you to pay off the debt more quickly. Similar to credit card rates, interest will rise after the lapse of the grace period.
Your Payment Options Are More Versatile
With balance transfer financing, you can make payments as low as 1% of the outstanding balance, with the option of paying more whenever you have extra cash.
You have a year to settle your debts. Unlike personal loans, the monthly payments on this one are flexible.
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How Balance Transfers Work
Balance transfers are the easy process of moving outstanding credit card debt from one card to another that charges no interest. It also enables you to borrow up to the amount of your most recent line of credit or credit card.
Interest Rates And Fees
Next, determine the transfer cost, generally between $30 and $50 per $1,000 moved (or between 3-5%). The most advantageous balance transfers typically have a considerably more rapid repayment plan than personal loans.
The loan has a three to 18-month payment schedule. Typically, you can arrange for a payment plan.
Nonetheless, after any payback period, you must clear all debts payable to the bank. Most loans for transferring balances have terms of three, six, or 12 months.
It’s important to remember that the finest balance transfer offers are usually only available for first-time clients who are also applying for a credit card or credit line with the issuing bank.
This means that consumers with an active credit card with a given bank are only eligible for a balance transfer loan. Following the approval of the loan amount, most balance transfer financing typically takes five business days to process.
Comparison Of Balance Transfer Offers In Singapore
Below is an overview of various banks and financial institutions in Singapore and their interest rates, fees, and terms.
|Bank/ Financial Institution||Processing Fee||Interest rate||Transfer rate|
|MayBank Credit Card Funds Transfer||$138||25.9%||0%|
|Standard Chartered Credit Card||$150||26.9%||0%|
|DBS Balance Transfer||$250||25.9%||0%|
|Citibank Balance Transfer for New Clients||$158||20.95%||0%|
|HSBC Personal Line of Credit Transfer||$150||18.5%||0%|
|OCBC Funds Transfer||$250||19.98%||0%|
|UOB CashPlus Funds Transfer||$250||17.95%||0%|
|UOB Credit Cards Balance Transfer||$338||25%||0%|
|POSB Balance Transfer||$250||25.9%||0%|
|MayBank Fund Transfer for Creditable Customers||$178||19.5%||0%|
Pros And Cons Of Balance Transfers
Let us analyse the benefits and drawbacks of bank transfers.
- A loan for a brief period. The average length of a balance transfer is between six and 12 months. After that period, interest will accrue at a rate comparable to that of a credit card.
- The transfer rate is 0%. You can transfer any outstanding balances without additional balance transfer fees or penalties. The processing fee is the sole additional expense.
- Payment options are flexible. When transferring a balance, you can pay only the minimum payment instead of a fixed monthly amount, which is not an option with a personal loan. You can pay more than the least sum if you have the funds available.
- Being subject to a possible increase in interest rate. If the loan term has ended and you fail to pay it off, you could end up paying interest rates that range around 26.9% per year — the same rate at which credit card bills accumulate.
- There is a processing charge. A processing fee, usually a proportion of the remainder of the transfer sum, comes in addition to this loan’s 0% interest rate. Although this may seem steep initially, it’s manageable when put next to the interest rates applicable to credit card accounts.
- Risk accruing more debt. If you keep using more significant amounts of cash than you can repay, consolidating your debts under one account with a higher credit limit could worsen your financial situation.
Considerations For Different Financial Situations
Consider a transfer as one option for paying off your urgent bills or credit card debt. If you do it right, this could be advantageous. Here are the considerations you should consider:
Discover A New Debt Location
Have a backup card in case you need to transfer your balance. Consider whether you want to take advantage of the no-interest balance transfer offers.
Instead of opening a new credit card account, you should use an existing one if it offers a cheaper APR. A favourable credit card history will give you a leg up.
Review Your Current Debt
You need to take stock of your current credit card debt and make a plan for paying it off. Don’t forget to include the total amount due and the rate for each debt. If you have a credit card, your annual percentage will also be your interest rate.
Review Your Favorite Options
Calculate the amount of the transfer charge. Most companies impose a 3-5% fee of the transferred amount. When calculating whether or not balance transfers would save you funds, it is essential to consider each card’s fees.
Consider The Card Deals Carefully
To maximise the no-interest balance transfer offers, consumers should look around at several credit cards and select one that offers the most overall savings.
Credit cards advertising a 0% APR rate may not all operate similarly. Some people may demand interest payments on fresh acquisitions, whereas others might not.
Prepare A Payment Strategy
Create a repayment schedule based on the months you’ll need to pay off the entire balance transfer loan. Paying off your bank debt during the interest-free grace period is in your best interest.
Put In A New Card Request
The application process for a card with a debt transfer frequently resembles getting a new credit card. Provide essential details such as your SSN, date of birth, housing costs, and monthly income. You must also know your score before getting a new balance transfer credit card.
Tips And Balance Transfer Strategies
The following are balance transfer tips and strategies for maximising benefits.
- Be aware of the rates for balance transfers. Before you do a transfer, you should do a comparison of interest rates and weigh the costs you will incur against the money you could save is a good idea. It is also advisable to do a comparison of terms and choose the most convenient.
- Verify your credit rating. Knowing your credit score is a good idea before choosing a balance transfer. You can find fantastic offers if you have a good rating.
- Create a repayment strategy. You can benefit from a one-year interest-free period with most Singaporean banks. It entails choosing your monthly payment amount for the duration of the loan.
- Make sure you comprehend the conditions and terms. You should do a comparison of fees and determine your APR as soon as possible. A card with 0% APR does not necessarily mean that rate also applies to purchases. This is true notably for balance transfers.
- Do not get rid of the original card upon transferring a balance. Always keep your credit card account open, even if you aren’t making any purchases.
- Pay down all obligations on time. Missed or late payments could cause you to fall behind on your repayment schedule, resulting in higher interest costs than you thought possible.
Balance Transfer Warnings
Most people commit the following mistakes, which they should try to avoid.
- Not Comprehending the Implications of a Balance Transfer.
- Eliminating your old credit card.
- Lack of a strategy for paying down debt.
- Not figuring out how much money you could save.
- Deficiency in making a necessary payment.
- Failing to set monetary priorities.
- Putting all of your new charges on your old card.
Frequent Balance Transfer Questions
Here are some common questions and the balance transfer answers.
When Should You Transfer Your Balance?
The optimum time to apply for a balance on credit card transfer financing is once you have solid credit, a repayment strategy, and a limited number of debts because having too many might overwhelm you. You should also be familiar with the conditions and terms.
What Could Go Wrong With A Balance Transfer?
There are a few drawbacks to getting a loan to pay off a credit card bill, such as having to pay an up-front charge and a potentially higher monthly payment if your loan term has come to an end and you have unpaid balances. You also run the danger of accruing even more debt.
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A balance transfer could be your saving grace if you’re struggling with mounting debt. It’s a zero-interest loan for a limited time that you can use to settle your credit card or line of credit amount.
Balance transfer loans offer many advantages over personal loans, including lower interest rates, shorter loan terms, and more adaptable repayment schedules.