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Clear your Debt using Credit Cards

By Digvijay Singh Kanwar

Clear your Debt using Credit Cards Do you have a pile of debt that is growing into a mountain? Are you struggling to get rid of the burden?

Incurring a heavy debt is a common issue today because loansand lines of credit are easily available across banks. It is ok to take a loan when you are in dire need of it or when your monthly income is sufficient to pay it off. However, when you indulge in overspending and land a debt, you have to take quick action and not prolong your situation. Don’t worry, there are ways to overcome it. One of the simpler methods is to use a credit card to wipe off your debts. Read on to find out more.

 

Balance Transfer Using a Credit Card

Banks offer balance transfers at 0% interest p.a. or lowinterest rates which you can use to pay off other debts. You can use the card to transfer funds from other credit cards, credit lines, or loans you have with other banks. You will have to pay a nominal processing fee that can be as low as 1.38% p.a.

Banks generally offer you low or zero interest rates for a limited period of 6 or 12 months. This is an ideal option for you if you are certain of clearing off your debt within this time frame. If, however, you are unsure of paying off the outstanding balance within this period, a balance transfer may not be the best option. This is because, once this introductory period elapses, the interest charged will be the prevailing interest rate of your credit card.

There is a minimum amount that you will have to transfer if you opt for such programmes. Maybank, for instance, offers a fund transfer programme where you get lower interest rates for a higher amount of fund transfer.

Interest Rates Offered in Maybank Fund Transfer

Tenure

6 months

6 months

12 months

Minimum transfer amount

S$2,000

S$10,000

S$2,000

Interest rate

0%

0%

4.99%

Processing fee

1.88% (EIR 4.02% p.a.

1.38% (EIR 2.96% p.a.)

NA

 

Now you know that by transferring funds, you will be able to repay your debt with a lower interest rate, through another credit card. Other banks that provide such offers are HSBC and Citi. The HSBC Advance Credit Card and Citi Prestige Card give you an opportunity to pay back your other loans at low rates such as 1.68% p.a.

Switch to a Credit Card with Low Interest Rates

While the prevailing interest rate of most of the credit cards is 24%-26% p.a., there are few available at a lower rate. When in debt, you can choose to switch to these cards. In the meanwhile, you can pay off your other loans.

It is a good idea to opt for low interest rate cards in general. However, if you are in a situation where you need to switch, Maybank Platinum Visa can be one of the options.

The interest rate offered by the bank on this card is 15% p.a. It also provides a cash rebate up to 3.33% within Singapore and 0.3% abroad. The quarterly service charge is waived off for 3 years, making it affordable even when your cash flow is less.

Responsible and Timely Payment

The best way to stay away from running into a debt in the first place is to pay your bills and monthly instalments on time. Suppose you have a personal loan, education loan, or a business loan, always remember the last date for payment of the instalments. The same goes for credit card bills. Remember the payment deadline. Even extending the payment for a day or two will result in unwanted interest amount amounts.

As a precautionary measure, you can always stick to one credit card to not build up a debt. That way, you will not have too many deadlines that you may forget. You can shop during sales and also go for cards offering rebates and reward points. As for loans, take them only when absolutely necessary. Manage your finances better and this should help you stay away from financial difficulties.

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