This article is written in collaboration with Standard Chartered Bank (Singapore) Limited (“SCBSL”). All information provided is for informational purposes only and is not intended to be as advice or an offer for any product or service. SCBSL is not liable for any informational errors, incompleteness, delays, or for any actions taken in reliance on information contained herein. All views expressed in the article are the independent opinions of DollarsAndSense.sg
Credit card balance transfer, also known as a credit card funds transfer, is a useful product that can help you better manage your finances.
If you are considering to take a credit card balance transfer, here are the pros and cons in doing so.
What Is Credit Card Funds Transfer?
A credit card funds transfer is a credit facility offered via your credit card.
The credit line granted on your credit card is the maximum amount you are able to charge for your retail purchases such as buying a laptop, air tickets for a vacation, etc.
On the other hand, a credit card funds transfer allows you to convert the credit line on your credit card in the form of cash to pay for purchases. You can apply for a credit card funds transfer at 0% interest with a one-time processing fee for a period of 6 or 12 months.
When used correctly, credit card funds transfer can be an effective tool to help you manage credit card debt or repay other loans that you may have taken.
Credit Card Funds Transfer – Pros Of Taking One
Let’s start off with how credit card funds transfer can aid in managing your cashflow.
# 1 Low Interest Rate
Besides a one-time processing fee, most credit card funds transfers do not charge any additional interest on the approved funds transfer amount during the approved promotional tenure.
For example, Standard Chartered Credit Card Funds Transfer has a processing fee of 1.99% (Effective Interest Rate (EIR): 4.12%) for a 6-month tenure and 4.5% (EIR: 4.86%) for a 12-month tenure with zero interest rate^ for both.
Comparing the EIR between credit card funds transfer and personal loans, the cost of borrowing is significantly lower.
|Credit Card Funds Transfer||Personal Loan|
|Loan Tenure||12 months||12 months|
|Effective Interest Rate||4.86%||8% to 13%|
Effective Interest Rate (EIR) is calculated based on the processing fee charged for the loan tenure. The EIR has been simplified for illustration purpose and is non-representative of any banks. The above information used for comparison is obtained from public sources and do not serve as a representation of any financial institution.
# 2 Short-Term Funds
If you need short-term funds to finance an item that you need to pay for (e.g. a medical emergency), a credit card funds transfer is one of the quickest ways in getting the funds you require.
You can enjoy interest-free funds with a one-time processing fee based on your chosen loan tenure of 6 or 12 months. However, do note that if you miss your monthly minimum repayment by the payment due date, prevailing interest and late fee charges will kick in.
# 3 Pay Other Loans
One of the main reasons for using a credit card funds transfer is for paying other loans you might already have.
For example, if you have unpaid credit card bills, you will start incurring a high interest of at least 24% p.a. for every month that the bill continues to remain unpaid.
As explained in our previous article, when you take a credit card funds transfer, you can use the funds to pay any existing bills or loans that you have. Thus, you get to reduce the amount of interest you pay, since the EIR for credit card funds transfer is lower than the EIR that you would otherwise be paying for your other credit card bills and loans.
Credit Card Funds Transfer – The Cons Of Taking One
While a credit card funds transfer certainly has its uses, there are some potential drawbacks that you should know about.
# 1 It’s Still A Credit Facility
This might be obvious to most people but could be overlooked by some users.
Although a credit card funds transfer provides you extra funds, it is still a credit facility where the amount you have borrowed still has to be paid.
For example, if you apply for a credit card funds transfer of $5,000 over a period of 6 months and use it to pay your credit card bills, you save on the higher interest you would have otherwise incurred if the bills remained unpaid. However, you still need to pay the principal amount of $5,000.
# 2 Penalties For Missing Required Payments
While a credit card funds transfer provides you funds at 0% interest, this interest is dependent on you meeting the repayment schedule.
If you are unable to repay the amount borrowed at the end of your tenure period, you will be charged prevailing interest on the remaining principal amount you owe and late fee charges.
Similar to credit card bills, you will be required to make minimum monthly payments. This is usually between 1% to 3% of the principal amount borrowed, so you will need self-discipline in ensuring your minimum payments are made on time.
# 3 The Amount You Borrow Is Offset Against Your Available Credit
As mentioned earlier, as a credit card funds transfer is a credit facility offered via your credit card, the amount approved through a credit card funds transfer will be offset against the available credit limit on your credit card.
For example, if your available credit limit is $10,000 and you use $8,000 for a credit card funds transfer, you will only be able to charge an additional $2,000 to your credit card, until you have paid the principal amount where your credit limit will be restored accordingly.
Thinking Of Applying For A Credit Card Funds Transfer?
If you are keen in applying for a credit card funds transfer, the Standard Chartered Credit Card Funds Transfer is an option you can consider.
It offers interest-free funds transfer with a one-time processing fee of either 1.99% (6-month tenure) or 4.5% (12-month tenure) which will be charged on the first month. The minimum monthly repayment is at 1% of the principal amount borrowed.
If you wish to find out more or would like to apply for the Standard Chartered Credit Card Funds transfer, you can do so here.
^This promotional interest rate is only valid for the approved tenure. The prevailing interest rate chargeable for the Credit Card account will apply after the approved tenure on the outstanding principal amount.
*Standard Chartered Bank (Singapore) Limited’s Credit Card Funds Transfer Programme Product Terms and Conditions apply. For full Terms and Conditions, refer to sc.com/sg/ccftterms
All Standard Chartered Bank Credit Card Funds Transfer (CCFT) applications are subject to SCBSL’s loan approval process at its sole discretion. For more information on the Standard Chartered Credit Card Funds Transfer (CCFT), visit sc.com/sg/ccft