A balance transfer lets you pay down the existing balance on a credit card by transferring it onto a new credit card account. The new credit card charges you 0% interest on the transferred balance for a certain period of time, usually 6 months, which must be fully paid off. If the transferred amount is not fully paid within this time period, the remaining balance is charged interest.
There are a few caveats to note before getting a balance transfer. Balance transfer credit cards are not entirely free. In some instances, you may be charged a fee of 3% - 5% on the transfer amount to complete the process.
The amount you can transfer must also be within the credit limit of the new card. For example, if the credit limit on the balance transfer card is S$8,000 and you want to transfer a balance of S$10,000, you will only be able to transfer up to S$8,000 (including fees).
Nevertheless, if used responsibly, a balance transfer gives cardmembers an opportunity to clear credit card debt without paying high interest rates.