Subscription Modal Banner
Weekly newsletter subscription
Get SingSaver’s top tips and deals, plus an exclusive free guide to investing, sent straight to your inbox.

I agree to the terms and conditions and agree to receive relevant marketing content according to the privacy policy.

Success Tick Icon
Congratulations on successfully joining Singsaver Newsletter

A Tale of Two Loans (and How a Balance Transfer Saved the Day)

Lauren Dado

Lauren Dado

Last updated 23 May, 2016

Here are two stories that show how balance transfers in Singapore help you avoid interest on unsecured loans.

What if you were struggling to repay the outstanding balance from several credit cards or unsecured loans? Wouldn't you take the opportunity to repay it without interest?

That's the idea behind balance transfers. These short-term loans allow you to consolidate and transfer all your outstanding unsecured loans on a credit card or credit line account, at low or 0% interest. As long as you pay your balance off within the 0% interest grace period (which can be anywhere from 3 - 12 months), you can save hundreds of dollars on interest rates, while clearing your debt for good!

Here are two stories that show how a balance transfer can help:

1. A Debt Consolidated

Meet Elaine. She made the rookie mistake of viewing her credit card as an “unlimited” source of funds, and overspent on travel and retail therapy. Now she’s facing a S$2,000 balance on two credit cards.

a debt consolidated

After months of struggling to repay the balance, Elaine visits a bank to see if she can find a way out of her debt. During her consultation, she learns about balance transfers - a short-term loan that is typically given on a credit card or credit line account.

All her outstanding credit card debts will be consolidated and moved to her balance transfer account. In this account, she will have a period of several months where she pays 0% interest. Most balance transfers in Singapore have 6- or 12-month 0% interest periods, though Citi Ready Credit Balance Transfer offers a 3-month tenor.

Instead of interest, Elaine will be charged a one-time transaction fee of anywhere from 1% to 5%, depending on the bank and tenor.

The interest-free period is when Elaine should pay off the full amount she’s borrowed. Unlike a personal instalment loan, a balance transfer doesn’t require her to pay a fixed amount every month. It’s up to her to decide how much she can pay each month, as long as she pays the minimum sum. For Citi Ready Credit Balance Transfer on a credit card account, the minimum payment is just 1% of the transfer amount or S$50, whichever is higher.

Elaine does a few calculations to see if a 6-month 0% interest balance transfer can help her out. She realizes that she can save S$200 on interest with a balance transfer, and that consolidating her debts into one loan is a convenient way to repay everything.

Credit Cards

Citi Ready Credit Balance Transfer on a Credit Card

Interest Rate25%0%
Interest PaidS$2,000 X 25% X (6/12) year = S$250S$2,000 X 0% X 6 months = S$0
Processing FeesS$0S$2,000 x 2.5% = S$50
Total Amount S$250S$50

There are a few things about balance transfers that Elaine needs to keep in mind. If she can’t pay the minimum sum, she will be charged a late fee. And if she still has a remaining balance by the time the interest-free period is up, the interest rates shoot up to 16% to 26% p.a - putting her back into the same dilemma when she started.

She must also make sure not to charge anything on the balance transfer credit card account. Otherwise, she will just add on to the existing debt she just transferred.

a debt consolidated 2

Time will tell if Elaine is able to overcome her debt without incurring additional fees. We hope that this experience taught her valuable lessons about using credit responsibly.

2. The Interest-Free Emergency Cash Advance

Besides avoiding interest on existing debts, you can also use a balance transfer to take on a new short-term loan at 0% interest - if you are confident that you can pay off the balance within the interest-free period.

interest free cash advance

Let’s take the example of Jonathan, who just learnt that his dad needs emergency surgery. His dad's co-pay insurance plan requires that he pays the first S$5,000 up front, an amount that he doesn’t have at the moment. Jonathan doesn’t have the cash either, but he offers to handle it so his dad can focus on getting better.

Jonathan decides to get a cash advance on his credit card, as it’s the fastest way to get a loan. With careful budgeting and a lot of discipline, he figures he can set aside at least S$1,500 from his monthly salary to pay it within 3 months. He knows his credit card charges 26.9% interest on any unpaid balance, but he shrugs it off as something he’ll just have to live with.

Had Jonathan thought to apply for a balance transfer instead, he could have saved as much as S$511 on interest and processing fees.

Below is a table outlining the cost differences of his credit card cash advance versus a balance transfer:

Citi Credit Card Cash Advance

(Paid within 3 months)

Citi Ready Credit Balance Transfer

(3 Month Tenor)

Interest Rate26.9%0%
Interest PaidS$5,000 X 26.9% X (3/12) year = $336.25S$5,000 X 0% X 3 months = S$0
Processing FeesS$300 (S$15 or 6% of amount withdrawn, whichever is higher)S$5,000 x 2.5% = S$125
Total Interest and FeesS$636.25S$125

It’s not too late for Jonathan, though. He can still move the remaining balance on his cash advance on a balance transfer and avoid the high interest rates of his cash advance.

interest free balance transfer 2

Just remember this one rule: you only save money on interest if you pay your existing debt within the interest-free period. Otherwise, you will be charged interest on the remaining balance, bringing you back to where you started!

So if the interest rates on your unpaid loans are keeping you up at night, a balance transfer is exactly what you need. If you need a loan for something else, personal instalment loan or credit line might be what you are looking for.

Read This Next:

How Do Balance Transfers in Singapore Work?

How to Avoid Paying Credit Card Interest in Singapore

Lauren Dado

By Lauren Dado

Lauren has been a content strategist and digital marketer since 2007. As's Content Manager, Lauren edits and publishes personal finance stories to help Singaporeans save money. Her work has appeared in publications like Her World, Asia One, and Women's Weekly.

Lauren is the Content Manager at When she’s not helping people save time and money, she’s doing yoga, hunting for bargains, and scoring travel deals.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

Sign up for our newsletter for financial tips, tricks and exclusive information that can be personalised to your preferences!