Balance Transfers in Singapore: How They Work & the Best Rates in 2022

We do not wish ill fortune on any of our readers, but should you ever find someday that you’re having difficulty repaying your credit card bills and that your accumulated interest is stuck in a sickening upward spiral, a balance transfer might be able to help you.

What is a balance transfer?

A balance transfer is a short-term cash facility, which is a fancy way to say that it functions as a kind of loan.

When you apply for a balance transfer, you are requesting to shift your existing debt to this new loan. You will then continue to repay your debt according to the terms of the balance transfer, rather than your credit card agreement.

The balance transfer helps you buy more time to pay off your credit card debt without having to worry about ballooning interest.

Balance transfers usually charge 0% interest, but they’re not entirely free, as you have to pay a processing fee, usually charged as a percentage of the amount of money that is approved for the transfer.

6-month and 12-month balance transfers are the most common type offered by all banks, but some also have 3-, 9- and 18-month transfers.

Which is the best balance transfer rate in Singapore in 2022?

Here are the rates currently being offered by banks for 6-month and 12-month balance transfers. All offer 0% p.a. interest, but charge a processing fee, so that’s what we’re comparing:

	6-month balance transfer processing fee	12-month balance transfer processing fee
Standard Chartered	1.5%	4.5%
Citibank	1.58% (for new to bank customers)	5.5%
OCBC	2.5%	4.5%
UOB	2.5%	4.28%
DBS	2.5%	4.5%
HSBC	2.5%	4.88%

At the moment, Standard Chartered is offering the lowest fees for 6-month balance transfers, at 0% p.a. + 1.5% processing fee.

The next best option for 6-month balance transfers is Citibank if you are not an existing customer of the bank. They are charging new customers 0% p.a. + 1.58% fee.

For 12-month balance transfers, the most cost-effective option is UOB, which is charging 0% p.a. + $4.28% processing fee.

If you don’t want to go with UOB, the next best options would be Standard Chartered, OCBC or DBS, which are all offering 12-month balance transfers at 0% p.a. + 4.5% processing fee.

How does a balance transfer work?

Now, we’re not asking you to take out more loans when you’re already in debt. Instead, a balance transfer lets you transfer your existing debt to a new facility that will, it is hoped, be cheaper for you in the long run.

How it is works is that it lets you you transfer your existing credit card balances to a 0% interest account. If the balance transfer is successful, you will no longer have to continue paying your credit card’s exorbitant interest rates.

You must pay the processing fee when the transfer is approved. But after that you can peacefully repay your debt without having to worry about snowballing interest, since the balance transfer facility charges 0% interest.

For instance, let’s say you have a $2,000 credit card bill from Bank A and a $3,000 bill from Bank B. You decide to shift this $5,000 of debt via a balance transfer from Bank C, which is charging a 2.5% processing fee.

You would thus have to pay an upfront fee of $125 (2.5% x $5,000). After that, you repay your $5,000 debt over a period of 6 months without having to pay any interest.

How much can you borrow with a balance transfer?

You can consider getting a balance transfer if you are struggling to repay credit card debt, whether from one card or several.

Do note, however, you can only transfer as much money as your credit limit with the bank will allow. So, if you have debt with several cards, you might in danger of not being approved for the full amount.

The amount you can get approved for a balance transfer is not unlimited. Your balance transfer amount is subject to your existing credit limit at the bank. So, if you’ve busted your credit limit on several cards, it’s unlikely you’ll be able to transfer all of this debt in one single balance transfer.

What if you don’t repay the full amount on time?

So if you’re going to use a balance transfer in order to pay off your credit card debt, try your best to do so once and for all, even if it means eating instant noodles every day for months.

Fail to stick to the repayment plan and the bank can start charging you their prevailing interest rate, which is usually similar to the credit card interest rates you were paying previously.

In other words, you could find yourself worse off than before, as you’ll be paying credit card-level interest rates after having already forked out a hefty processing fee.

If you aren’t sure you’ll be able to repay the loan in full during the term of the balance transfer, then you should consider a personal loan instead, as these can give you more time to pay back the money—up to several years if necessary.

Balance transfer vs. personal loan: which is better?

Both balance transfers and personal loans can buy you time to repay your credit card debt and stop your interest from spiralling out of control.

Unlike balance transfers, personal loans do charge interest, but usually at much lower rates than credit cards.

Which is the better option for you? It depends on several factors:

• Your loan amount
• How much time you need to pay it off
• Total cost (processing fees + interest)

Loan amount: Before you can get a balance transfer approved, the issuing bank looks at how much credit limit you have with them. This is usually 2X to 4X your monthly income (2X if you earn less than $30,000 a year; 4X if you earn $30,000 to $120,000 a year). So if you earn $3,000 a month, your credit limit would be $12,000.

If your credit card debt exceeds this amount, you won’t be able to get a balance transfer for the entire sum.

Time taken to repay: Balance transfers are typically short-term loans, with the longest tenure being 18 months. But you’ll really have to commit to abiding by the repayment schedule, otherwise you could find yourself in hot water all over again.

If you’re not confident that you can repay your debts in full within 18 months, opt for a personal loan instead. Personal loan tenures are longer, lasting from 1 to 7 years, making your instalments more manageable. Of course, the longer your loan is, the more interest you pay.

Total cost: If both balance transfer and personal loan are feasible, then you’ll need to do the math and calculate whether it’d be cheaper for you to pay a balance transfer’s processing fee or the total amount of interest over the full term of a personal loan.

Compare personal loan interest rates right here on MoneySmart to figure out which option is best for you.