If you’re looking at your credit card statement and getting worried about how your interest keeps snowballing with each new month, or if you’re short on cash and need to make a payment urgently, but you’re concerned with the high interest rates on personal loans, you can consider getting a balance transfer.
What is a balance transfer?
A balance transfer is a short-term cash facility that is typically offered at 0% interest, subject to a processing fee on the approved transfer amount. It can help you transfer your outstanding credit card balances (hence the name!) to a 0% interest account or provide you with an immediate boost to your cashflow in a time of need. Some banks also term this a short-term funds transfer facility.
How does a balance transfer work?
When you apply for a balance transfer, you are borrowing from the available credit limit of your existing credit line or credit card account. The amount you borrow will be transferred to a bank account of your choice.
In that sense, it is just like a personal loan. However, there are significant differences between the two.
What is the difference between a balance transfer and a personal loan?
There are four main differences between a balance transfer and a personal loan.
|Balance Transfer||Personal Loan|
|Interest Rate||0%||4.5% to 7%|
|Processing Fee||1% to 5%||1% to 2%|
|Repayment Term||3 to 18 months||1 to 5 years|
|Repayment Amount||Varies, but minimum 1% to 3% of outstanding amount per month||Fixed amount per month throughout the term|
As you can see, for balance transfers, you are expected to only repay the bulk of the amount you borrowed by the end of the repayment term. You need to only pay a small amount of the amount you borrowed (or the minimum repayment amount, whichever is higher) monthly prior to the end of the repayment term.
For example, if your balance transfer is for 6 months, your outstanding amount is $5,000, and your minimum payment is $50, then for the first 5 months you only need to pay $50 each, but on the 6th month, you need to repay the remaining $4,750. Please also note that a one-time processing fee will be charged on the first month upon the approval of the balance transfer.
Do be careful: If you do not repay the full amount of the balance by the end of the term, the interest rate will change from 0% to the effective interest rate of the credit card or personal line of credit which you had initially transferred the funds from, which can be as high as 30% per annum.
Who should apply for a balance transfer?
Balance transfers are best if you need cash urgently, and when you are also able to make full repayment by the end of the term. It is also most appropriate if you are looking for short-term repayment loans and you want to avoid the higher interest rates on other term loan facilities.
What else should I be aware of?
Though the interest rate is at 0% for balance transfer, banks charge a processing fee of 1% to 5% of the approved transfer amount. You should therefore look for a bank that offers you the lowest processing fee for a balance transfer.
Which bank is offering the best balance transfer rate in Singapore for 2018?
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|
|Citibank||0% p.a.+ 1.58% fee
(for new to bank customers)
|0% p.a.+ 5.5% fee|
|Standard Chartered||0% p.a.+ 1.99% fee||0% p.a.+ 4.5% fee|
|OCBC||0% p.a.+ 2.5% fee||0% p.a.+ 4.5% fee|
|UOB||0% p.a.+ 2.5% fee||0% p.a.+ 3.88% fee|
|DBS||0% p.a. + 2.5% fee||0% p.a.+ 4.5% fee|
|HSBC||0% p.a.+ 2.5% fee||0% p.a.+ 4.88% fee|
Do note that not all banks offer 3-month and 18-month balance transfers, hence we won’t include them in the above table.
The lowest rate in the market for 12-month tenure is offered by UOB at 0% p.a.+ 3.88% processing fee. Do note that this is a special online exclusive.
The lowest rate in the market for 6-month tenure is offered by Citibank, but only for those who do not have any existing relationship with the bank. They are offering 0% p.a.+ 1.58% processing fee. If you are already a Citibank customer, it becomes 0% p.a.+ 2.5% processing fee.
With that in mind, the lowest balance transfer rate for a tenure of 6 months is offered by Standard Chartered, at 0% p.a. with 1.99% processing fee when you apply online. This applies across all existing customers of Standard Chartered who have a credit card with the bank. Click here for more details.
How easy is it to apply for Standard Chartered Funds Transfer?
If you already have a Standard Chartered Credit Card, you can simply apply for a Funds Transfer online. It is a short form which takes only a few minutes to complete, and you’re just one click away from enjoying cash at 0% p.a. interest for 6 months with a 1.99% processing fee.
If you do not have a Standard Chartered Credit Card, you can apply for one online now. We recommend the Standard Chartered Unlimited Cashback Credit Card, since you can get up to $100 Cashback as an online sign-up bonus, plus get an additional $20 Cashback when you make your first 5 qualifying transactions on your mobile wallet.
This article was brought to you in collaboration with Standard Chartered.
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