Balance Transfer Singapore: Is It Better Than a Personal Loan?
What is a balance transfer? A balance transfer is a short-term cash facility that has 0% interest. It's useful for flexible repayments over a short period of time. The catch is that you need to pay a one-time processing fee and make sure that you clear what you owe within 3 to 18 months. Is it better than a personal loan? Let’s work it out.
Making Sense of Balance Transfers in Singapore
How does a balance transfer work? Is it better than a personal loan or a debt consolidation plan?
Balance Transfer Singapore: How Does It Work?
A balance transfer works by transferring your outstanding credit card balances to a 0% interest account. Essentially, you borrow from the available credit limit of your existing credit line or credit card account.
The repayment period is usually much shorter than a personal loan, from 3 months to 18 months. You can choose to pay a minimum sum of 1% to 3% of the outstanding amount per month, but at the end of the repayment period, you must pay the remaining of what you owe.
For example, you owe $5,000 and put it on a 6-month balance transfer. Your minimum payment is 1%, which is $50. For 5 months, you pay $50. This means that on the 6th month, you must repay the remaining $4,750, or the 0% interest rate will revert to the original rate, which can be as high as 30% p.a.
It’s a good solution if your cash flow is tight but you know for sure that you will receive a large amount of cash (perhaps your bonus or a maturing endowment plan) that you can use to repay in the following months.
Things to Note Before Applying for Balance Transfer
If you are looking for a way out for your credit card debt or an emergency expense, a balance transfer might be the perfect solution if you use it responsibly! Here's a list of things to note before applying for a balance transfer.
The limit of your balance transfer is tied to your credit card or credit line account, with the maximum amount dependent on your salary.
Minimum Repayment Sum per Month
Unlike a personal loan, you can choose how much you want to pay each month - as long as you meet the minimum repayment sum each month.
Late Payment Fees
Late payment fees can go as high as $60 to $125 depending on the bank. Be sure to meet the minimum repayment sum to avoid these high fees!
Interest-Free Periods & Processing Fees
Depending on the bank you're looking at, there are interest-free periods of 3, 6, 9 or 12 months. However, instead of paying for interest you'd be paying for processing fees ranging between 1 to 5%.
Interest Rates after Interest-Free Periods
If you still have remaining balance by the time your interest-free period is up, the interest rates can go as high to 19% to 26% p.a. Be sure to pay off the remaining balance before the end of the interest-free period!
Top Balance Transfer Rates in Singapore (2021)
Consolidate credit card balances into one account so you can make flexible repayments at low interest rates.
DBS Balance Transfer
Pay as little as $50 or 2.5% of the statement balance, whichever is higher.
6-month DBS Balance Transfer: 0% p.a. + 2.5% fee (online exclusive). 5.27% EIR for Cashline and 5.34% EIR for credit card.
12-month DBS Balance Transfer: 0% + 4.5% fee (online exclusive). 5.06% EIR for Cashline and 5.2% EIR for credit card.
OCBC Balance Transfer
The minimum monthly repayment is $150.
3-month OCBC Balance Transfer: 0% p.a. + 1.8% p.a. processing fee. EIR 7.38% p.a.
6-month OCBC Balance Transfer: 0% p.a. + 2.5% p.a. processing fee. EIR 5.34% p.a.
9-month OCBC Balance Transfer: 0% p.a. + 3.5% p.a. processing fee. EIR 5.18% p.a.
12-month OCBC Balance Transfer: 4.98% p.a. + 0% p.a. processing fee. EIR 4.98% p.a.
Citibank Balance Transfer
If you take up a balance transfer on Ready Credit, the minimum payment is 3% of the transfer amount or $45, whichever is higher throughout the loan tenure.
For credit cards, the minimum payment is 1% of the transfer amount or $50, whichever is higher throughout the loan tenure.
Citibank 6-month balance transfer (existing): 0% + 2.5% processing fee. EIR 5.81% for credit card, EIR 5.72% p.a. for Ready Credit.
Citibank 12-month balance transfer (existing): 0% + 5.5% processing fee. EIR 7.87% for credit card, EIR 7.58% p.a. for Ready Credit.
UOB Balance Transfer
Pay from as little as S$30 or 2.5% of the statement balance (whichever is higher) for CashPlus.
For Credit Cards Balance Transfer, pay from as little as 3% of outstanding statement balance of S$50, whichever is higher.
6-month UOB Balance Transfer: 0% + 2.5% processing fee (EIR 5.34% with UOB credit cards and 5.27% with UOB CashPlus)
12-month UOB Balance Transfer: 0% + 4.28% processing fee (EIR 4.95% with UOB credit cards and 4.82% with UOB Cash Plus). Online exclusive rates.
Standard Chartered Balance Transfer
Pay as little as $50 or 1% of the statement balance, whichever is higher.
3-month StanChart Balance Transfer: 0% p.a. + 0.7% fee. EIR 2.83% p.a.
6-month StanChart Balance Transfer: 0% p.a. + 1.5% fee. EIR 3.10% p.a.
9-month StanChart Balance Transfer: 0% p.a. + 2.5% fee. EIR 3.51% p.a.
12-month StanChart Balance Transfer: 0% p.a. + 4.5% fee. EIR 4.86% p.a.
HSBC Balance Transfer
Pay as little as 3% monthly minimum payment.
6-month HSBC Balance Transfer (Under $10,000): 0% p.a. + fee 2.5%. EIR 5.47% p.a.
12-month HSBC Balance Transfer (Above $10,000): 4.88% p.a. with no processing fee (EIR 4.88% p.a.)
6-month HSBC Balance Transfer (Under $10,000): 0% p.a. with 1.5% fee (EIR 3.26% p.a.)
12-month HSBC Balance Transfer (Above $10,000): 4.88% p.a. with no fee (EIR 4.88% p.a.)
Best Balance Transfer in Singapore (2021)
|6 Months Balance Transfer||Standard Chartered Funds Transfer||0% interest + 1.5% processing fee|
|12 Months Balance Transfer||UOB CashPlus Funds Transfer||0% interest + 4.28% processing fee|
|Flexible Repayments||DBS Balance Transfer||Minimum repayment of 2.5% of balance or $50, whichever is higher|
|Standard Chartered Funds Transfer||Minimum repayment of 1% of balance or $50, whichever is higher|
|UOB CashPlus Funds Transfer||Minimum repayment of 2.5% of balance, or whichever is higher|
Balance Transfer Interest Rates & Promotions Singapore (2021)
|Bank||Balance transfer promotion||6-month balance transfer||12-month balance transfer|
|Standard Chartered||None||0% p.a. + 1.5% fee||0% p.a. + 4.5% fee|
|Citibank||0% p.a interest for 6 months with 1.58% service fee with Citibank Balance Transfer||0% p.a. + 1.58% fee (for new to bank customers)||0% p.a. + 5.5% fee|
|UOB||$80 to $160 cashback (depending on loan amount) when you apply for UOB Balance Transfer (12-month tenure) online.||0% p.a. + 2.5% fee||0% p.a. + 4.28% fee|
|OCBC||$80 to S$320 cashback (depending on loan amount) when you apply for Balance Transfer online||0% p.a. + 2.5% fee||4.98% p.a. + 0% fee|
|DBS||$150 to $500 cashback (depending on loan amount) for DBS Balance Transfer (12-month tenure) @ 4.5% administration fee via self-apply online application form||0% p.a. + 2.5% fee||0% p.a. + 4.5% fee|
|HSBC||None||0% p.a. + 2.5% fee||4.88% p.a. + 0% fee|
Should You Get a Balance Transfer or a Personal Loan?
If you still cannot decide between a balance transfer or a personal loan, consider the below factors:
Loan amount: If you are borrowing a large loan amount, it is safer to take out a personal loan. You can repay in fixed amounts over a longer time frame of between one and five years. If the amount is small, you can do a balance transfer to enjoy 0% interest rates. If you choose a balance transfer, you must make sure that you will have the cash to repay within the loan tenure of 3 to 12 months.
Your cash flow in the near future: Balance transfers usually have a tenure of 3 months, 6 months or 12 months. While you are allowed to pay a small minimum sum monthly during this repayment period, you must clear your debt within the end of it. This means that you need to be sure that you will have the money to repay within 3 to 12 months. Otherwise, the interest rate jumps back up to 25% to 30%.
If you are considering a personal loan for steady repayment of debt, here are some recommendations.
Key Differences Between Balance Transfer and Personal Loan
|Balance Transfer||Personal Loan|
|Interest rate||0% p.a.||4.5% to 7% p.a.|
|Processing fee||1.5% to 5.5%||1% to 2%|
|Repayment period||3 months 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|
|Early repayment penalty||No||Yes|
Top 3 Personal Loans in Singapore (2021)
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Remember to Pay Full Amount During the Interest-Free Periods
Frequently Asked Questions
How do I do a balance transfer?
- If you have decided that a balance transfer is the best option for you, you simply need to apply through the bank's website. Sometimes banks run online exclusive promotions so do check before you apply. Generally, a balance transfer is done on an existing credit card account or credit line, so you would have to apply for an account if you don't already have one.
Will a balance transfer affect my credit score?
If you have taken out a balance transfer and abided by the terms and conditions, a balance transfer could even improve your credit score. This means that you paid the necessary minimum sum monthly on time and the full amount at the end of the repayment term, which signals to the banks and financial institutions that you are reliable and do not have a risk of defaulting.
However, if you have applied for multiple balance transfers and are in the midst of repaying them, there is a possibility that the credit bureau will note that your debt amounts are not paid in full. This may have a negative impact on your credit score.
Is it smart to pay off one credit card with another?
- Yes, if you use a balance transfer credit card which has 0% for a short period of time and you are confident of repaying on time, it could be smarter to consolidate credit card debts into one account. It isn't smart to pay off one credit card with another without first comparing interest rates.