Credit card debt can be a major financial burden for many Singaporeans. If you have spent over credit your limit, you might find yourself in the vicious cycle of debt and repayment. With the credit card bills piling up every month, many Singaporeans look for other options to break out of debt. Two of the common ways are balance transfer and debt consolidation. Though both are used to manage debts, they are different in many ways.
Transferring balances from multiple credit card issuers to a single one is called balance transfer. A balance transfer is usually done to get a breather when it comes to interest rates. Most banks in Singapore offer a limited interest-free period after you transfer, usually starting from 3 months and up to 12 months. However, note that other fees such as processing fees will be applicable. After the interest-free period, your payments will start accruing interest. Popular banks in Singapore offering balance transfer include HSBC, Citi, DBS, POSB, UOB and OCBC among others.
Debt consolidation plan (DCP) consolidates all your unsecured debt into a single plan at low interest rates. Leading banking institutions offer debt consolidation plans to customers with long loan tenures (up to 8 years). You will have the convenience of making low monthly payments to a single bank instead of multiple payments month-on-month at varying rates.
Though both balance transfer and DCP are useful financial tools to manage debt, your selection of a method is completely dependent on your current financial situation.