Balance Transfers in Singapore

Do you want to consolidate your debts and save on interest costs? A balance transfer (also known as fund transfer) offers you an introductory low or 0% interest rate when you move your existing debt from one card issuer onto the new credit card or credit line. Most financial institutions in Singapore offer a 0% rate on balance transfers.

The promotional interest rates on balance transfers apply for a fixed number of months; usually between 3 to 12 months, but can vary by promotion. At the end of this period, your interest rate reverts to a higher standard variable rate. In many cases, you are required to pay a one-time balance transfer fee (also known as processing fee) on the approved transfer amount when doing a balance transfer and an annual card fee, unless one or the other are also waived as part of the promotion. Even with these costs, a low or 0% interest rate means you can save a lot when repaying your debt.

How can balance transfers save you money?

This guide will help you to learn how balance transfers work and how they can save you money on credit card interest payments. We also look at the different types of balance transfer cards available in Singapore; how to compare balance transfer offers to pick the one best suited for you; common concerns about balance transfers; mistakes to avoid with balance transfers; and how to improve the chances of a successful application.

What is a balance transfer?

A balance transfer refers to the process where you transfer funds to clear your outstanding credit card balances from a different bank, using the available credit limit of your existing credit line or credit, which typically offering a lower interest rate for an introductory period. Some banks also term this a short-term funds transfer facility. Generally, this promotional interest rate is 0% for a set period that varies from 3 to 12 months. Most balance transfers accept debts from other credit cards when they are issued by different financial institutions. Some balance transfers, for example, Standard Chartered, allow you to move debt from existing personal loans as well.

Credit cards with balance transfer options in Singapore

Answers to the most common balance transfer questions and concerns

How do I apply for a balance transfer offer?

Most banks in Singapore offer balance transfer feature at 0% for a given period. To take advantage of a promotional 0% interest rate, you need to request a balance transfer when you apply for a new credit card. In most credit card applications, you will find a section that asks whether you would like to transfer existing debt to your new account. You will be asked for details of your existing credit card debt including where it is from and how much of it you want to transfer to the new card. Bear in mind that most banks only allow 90-95% of your approved credit limit for balance transfers. If your application is approved, your debt will be automatically moved over to your new account once you activate the new card. Remember to check for additional fees, such as processing fees on the balance transfer. Balance transfer is enabled only if you meet the eligibility requirements to receive approval.

What is a balance transfer fee?

Majority of the balance transfers charge a balance transfer or processing fee. This is a one-time fee that is calculated as a percentage of the debt you transfer to the new card. Typically the balance transfer fee is between 1% and 5% of your debt balance you transfer, depending on the repayment term. For example, if you have a S$5,000 debt which you want to transfer, and the fee is 3%, your transfer fee will amount to S$150.

How much money can I save with a balance transfer?

Exactly how much you will save with a balance transfer depends on a number of factors:

• The size of your debt you plan to transfer
• The current rate of interest you pay on that debt
• The length of the 0% or low rate balance transfer offer from your new card company
• How you keep up with repayments.

Depending on the level of debt transferred, you may save hundreds or thousands of dollars in interest if you actually work on paying off the entire debt you transferred before the expiry of the promotional period.

Do I have to contact my old bank and new bank to make the switch?

No. Your new card issuer will manage this process after both your card and the balance transfer are approved. You simply need to give the details of your existing card when you apply. But if you want to close your old card account, you will need to do this yourself by contacting your bank. If you don’t close your old account, you could be stuck with ongoing annual fees and any other maintenance costs that come with your existing account.

What’s in it for my new credit card issuer?

Credit card issuers make money when cardholders pay interest. Then, why would they want to charge 0% interest even for a while when they could charge you 25% or more? Here’s why:

They know that every card customer, including you, will eventually revert to a higher rate. If you don’t pay off your entire debt at the 0% rate, you will end up collecting interest at the prevailing rate for your card. This is usually the purchase rate or cash advance rate, which can range between 25% and 30% in Singapore (from research at time of writing). But, it is typically over 25% on most credit cards. Once that happens, your new credit card issuer can, over time, potentially make hundreds or even thousands of dollars from you in interest charges.

Managing personal finances and paying off credit card debt is a challenge to many. Banks know that. If you have a credit card balance that you cannot pay off immediately, but can manage to pay over 6 or 12 months, it makes a lot of sense to opt for a balance transfer. But not everyone opts to do so. In order to persuade Singaporeans to switch using balance transfers, most banks offer a 0% balance transfer promotions lasting 3 to 12 months.

Are there any hidden catches involved in a balance transfer?

Credit card issuers have to disclose full details about a balance transfer. Here are two key details you must check out to avoid snags:

• Reverting interest rate. The promotional rate for your balance transfer is locked in, so you won’t have to pay higher interest rates during the offer. When the promotional offer ends, a higher revert rate will apply to any remaining debts. This is called the reverting rate. If you want to save on interest costs, go for a card with lower reverting rates of interest, especially if you will be unable to complete repayment during the interest free promotion period.
• Minimum payments. Even if the card offers a 0% balance transfer rate, you will still have to make the minimum payment each month. If you only make the minimum repayment, you are unlikely to pay off the entire debt before the promotion ends. Once the promotion period ends, any remaining debts on your credit card will start collecting interest and your balance will continue to grow.

Can I request a balance transfer after submitting my application?

Yes. It is possible to transfer a balance after you’ve applied for the card. However, the exact terms and conditions of doing this may vary depending on the bank. It is best to contact your bank directly to discuss your options.

How to do a balance transfer in five steps

Follow these five steps to successfully apply for a balance transfer offer and improve your chances of approval:

1. Check how much you’re eligible to transfer. The amount you can transfer to your new account usually varies.
   • Some banks may let you transfer as much as 95% of your approved credit limit on the new account. So, if you have a S$10,000 debt, and your new card has a S$10,000 credit limit, you’ll only be able to transfer up to S$9,500.
   • Most banks also have a minimum balance transfer amount to make it worthwhile to transfer. Usually this is S$500 but may be S$1,000 or more, depending on the bank.
   • There may be special offers with processing fee waivers, especially if you want to transfer larger balances.
   • Contact your current issuer to get an accurate payout figure for the account before you apply for a balance transfer. This is important because the final payout figure might be different from the balance that appears in your account statement due to various charges, such as interest payments, annual fees and direct debits.
   • Make sure before you apply that you have selected a new card issuer that accepts transfers from your current bank and card.
2. Submit your application. Once you have found the balance transfer option that suits you best, click on the apply button to be directed to a secure online application. Check out our guidelines for successfully applying to maximise your chances of approval.
3. Wait for your application to be approved. Some banks can process your request and offer approval within seconds of applying. Others may take longer, between 5 to 7 working days. If you haven’t heard from the bank after this time, you may contact them to find out if there’s an issue.
4. Confirm transfer and close your old account. Once your new card is set up, contact your old bank and make sure the previous account is closed to avoid any further fees or interest payments, unless there is still an outstanding debt balance you could not transfer.

How can I compare balance transfer offers?

How can you pick the right balance transfer card from among the many deals available in Singapore? Here are the crucial features that you need to compare when seeking to maximize your savings. We include all these features when calculating your total interest saved.

• Balance transfer interest rate. This is the interest rate that will be charged on the balance transferred to your new card. Most banks are offering transfers at 0% interest rates for a promotional period, but some may be higher. This is often referred to as the “promotional rate” or “introductory offer”.
• Promotional period. The promotional period refers to how long the 0% interest or low-interest rate applies. Depending on the card, this can usually range between 3 to 12 months. Once the promotional period expires, you will pay a much higher rate of interest, knowns as the “revert rate”. The longer the promotional period, the more time you have to clear your debt.
• Revert rate. After the promotional period ends, the remaining debt will be charged interest at the higher “revert rate”. Typically, this is the standard cash advance or purchase rate and ranges from 25% to 30%. If you do not think you can repay your entire debt before the promotional period ends, you should look for a card with a lower revert rate to minimise your interest costs in the future.
• Balance transfer or processing fee. This is a one-time fee, charged as a fixed percentage of the debt you transfer to your new card. Typically, this ranges from 1% to 5% of the debt. Some card issuers may offer to waive balance transfer fees on high transfer balances. Your goal should be to find a deal with low transfer fees that do not outweigh the interest savings you make from the 0% balance transfer offer.
• Annual fee. Every credit card charges an annual fee which varies significantly from bank to bank and depending on the type of credit card. It is usually charged in advance. It shows up in your card statement and is treated as a purchase, incurring the same interest rate as other purchases you make. When you go for a promotional 0% purchase offer, just as with all other purchases, your annual fee won’t accrue any interest until that promotion ends. Some balance transfer offers may waive the annual fee in the first year to make their offer more attractive by showing higher savings for you. To get maximum value from your balance transfer card, make sure that the interest savings you make from the 0% balance transfer significantly exceed the annual fee.

These card features are less important, but potentially worth factoring into your comparison:

• Purchase rate: This is the interest rate that applies to any new purchases made on your credit card. In Singapore, credit cards have purchase rates ranging between 25% to 30%.
• Other benefits: Some cards do not offer benefits under loyalty points in the balance transfer grace period. Other cards may offer additional benefits such as the ability to earn reward points, various loyalty offers such as free insurance for travel booked on the card. These could prove to be tie-breakers when you compare two similar cards. But, they are not key factors, and shouldn’t form the basis for your decision when comparing balance transfer offers.

Why might my application be refused?

Financial institutions assess balance transfer applications carefully. To increase your chances of approval, see some of the factors that could cause a bank to decline your application before you apply:

1. Poor credit history. You’ll need a good credit history to obtain a balance transfer deal. If you haven’t checked recently, you may find out what your current credit score is with a report from the Credit Bureau. If you have a poor credit history with delayed and missed payments you need to repair your credit score before you can apply for more credit and be approved for a new credit card, balance transfer or otherwise. It is important to remember, however, that prompt payments, regular paying off of debt in full and other responsible credit behaviours for at least a year will only clean up the ‘Account Status History’ section of your credit report. Other parts of the credit report will still show your credit card issuer about bankruptcies, defaults and debt management programs in the past.
2. Submitting multiple applications too rapidly. Each application you make for a balance transfer deal, or for loans or new credit cards is recorded in your credit file. Too many such enquiries in the credit report tell your lenders that you have been trying to take on more debt. This is a red flag that offering credit to you increases their credit exposure. You can keep such enquiries to a minimum by limiting the number of credit cards and loan facilities you apply for. Review enquiries on existing loan facilities do not affect your score. When an application is refused, avoid applying to a different credit card straight away. Take time instead to repay your debts. The next time round, carefully compare your card options and ensure you meet all the eligibility criteria before applying.
3. Transferring to the wrong bank. Banks do not allow balance transfers within institutions of the same group. So before applying for a balance transfer offer, find out which issuers will accept your balance transfer. If you apply for a balance transfer deal from a bank with the same owner as your current card, your application will be immediately refused.
4. Cards in a different name. Your new balance transfer card must be in the same name as your current card. If you apply with a different name, such as your partner’s name, your application will be rejected. If you want a card with multiple account holders, follow the steps in our guide to getting joint accounts.

Mistakes to avoid with balance transfers

Used intelligently, a 0% balance transfer card will reduce your interest payments and help you repay your credit card debt faster. Used in the wrong way, your debts may escalate. Knowing about these common mistakes will help you avoid getting trapped in balance transfer debt.

MISTAKE: Forgetting you still have to make payments

Despite the promotional period with interest at 0%, you still have to pay off the minimum payment each month. Failure to do so will result in penalty charges for non payment of minimum balance.

The minimum repayment is usually calculated as the higher of:

• A percentage of the outstanding balance or
• A given dollar amount which varies by bank.

The bank will say your minimum payment will be “either 3% of your outstanding balance or S$50, whichever is higher”. The percentage and the minimum dollar amount varies by bank.

MISTAKE: Not checking the revert rate

Once your balance transfer grace period ends, you will have to begin paying the revert rate on any remaining balance. So it makes sense to choose a balance transfer offer with a lower revert rate than your current credit card rate. Regardless of the revert rate, ensure that you repay the entire old debt before the revert rate applies.

MISTAKE: Not making more than the minimum repayment

If you’re only paying the minimum repayment each month, you won’t be able to repay the entire balance by the time the 0% balance transfer offer ends. Then your debt will start to collect interest and it will grow again. Instead, you should calculate exactly how much you need to pay each month to repay the entire balance by the time the interest-free period ends. You can do this by dividing the size of your debt by the number of months in the balance transfer offer. This will give you a goal repayment to meet every statement period to clear the debt before the 0% promotion ends.

MISTAKE: Putting new purchases on your card

Adding new debt will slow down your ability to repay your card. Don’t buy anything new on your credit card that you can’t immediately pay off in full. Also remember that banks allocate your repayment amounts to whichever debt is accruing the highest interest on your account. So, if your balance accrues 0% interest and your purchase collect the standard interest rate, your repayments will go to the purchases rather than the balance transferred. Even if your card has a 0% rate on new purchases, you should concentrate on repaying your debt rather than making more purchases.

MISTAKE: Not considering all applicable fees

While you won’t be charged interest with a 0% balance transfer, you may have to pay annual fees as well as a balance transfer fee. Make sure to factor these in choosing a balance transfer deal. Don’t dismiss cards purely on the basis of fees. Use our calculator, which compares the total costs for cards, to find the right deal for you.

MISTAKE: Keeping your old card open

It is tempting to want to hang on to your old card “for use in emergencies”. Realistically, if you have run up debt on this card before, you are very likely to do so again. Even if you don’t use this card again, as long as the account is open, you will have to keep paying the annual fees on it. The best course of action is to cancel the card after the balance transfer and concentrate on paying off your balance. Remember to transfer any regular payments. Ask your old bank for the final payout figure so you don’t have any leftover debt.

Answers to the most frequently asked questions about balance transfers

Applying for balance transfers

• Which banks can I balance transfer to?

  The key rule that decides whether you can balance transfer to a bank is whether or not your existing bank belongs to the same credit provider group. For example, you may not be able to transfer a POSB credit card balance to a DBS credit card or vice versa because POSB is owned by DBS.

• Can I apply for another balance transfer offer with the same bank after my current promotion has ended?

  No. Existing customers are ineligible to apply for balance transfer offers with their existing bank. However, if you balance transfer to a different bank, when this balance transfer promotion has ended you will be able to transfer to the first bank again; or to another qualifying bank.

• Can I transfer a credit card balance from overseas to a Singaporean account?

  No. You can only transfer balances from credit cards or loans issued in Singapore, in Singapore dollars.

• How long will it take for the old balance to appear in my new account?

  While you may receive approval for your credit card with some issuers within seconds, it may take longer for your old balance to appear in the new account, depending on the bank. Remember that the 0% balance transfer offer applies as soon as your card is approved rather than when your balance is in your account, which may take a couple of weeks.

Using balance transfers

• How often should I make repayments and how much should they be?

  You should make repayments by the due date given on your bank statement for each statement period. While you can get away by with only the minimum repayment, you should always aim to pay more each month so that you can clear your transferred debt faster. Remember that your 0% balance transfer offer that will only apply for a limited period. To avoid paying interest on your debt, you should calculate how much you need to pay each month by dividing the size of your debt by the how the length in months of your promotional period. This will give you a goal repayment to make each month to repay your balance before the promotion ends. If you also made purchases at the prevailing rate on the same card, be careful to repay those amounts in their entirety as well. Not doing so will end up resulting in a higher debt burden than you had before the balance transfer.

• Can I repay my card before the balance transfer period ends?

  Yes, you can repay your balance as early as you’d like. In fact, it is wise to clear your debt as soon as possible to avoid the revert rates and any additional interest costs. Unlike a fixed schedule personal loan or home loan, no penalties apply for clearing your credit card debt ahead of time.

• Which transactions do my repayments go towards first, purchases, cash advances or my balance transfer?

  Banks allocate your repayments to the balances accruing the highest rates of interest first. This means that with a low interest rate balance transfer promotion, repayments will usually go towards settling your standard rate purchases and cash advances first. As a result, it is ideal not to make other transactions when repaying a balance transfer to ensure that all of your repayments are dedicated to clearing your debt.

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