Tuesday, February 10, 2009

Save the earth and stop giving me 0% p.a. cash!

For those of you who own credit cards like I do, you are definitely receiving leaflets and leaftlets from the banks, trying to lend you thousands of dollars to clear your credit card bills, month after month without fail.

Your monthly statement account could have been just one simple piece of A4 paper, but instead it always come in a thick parcel of discounts-of-the-month and 0%-p.a.-cash-give-away leaflets. As long as you own the credit card, you will have to live with throwing away these 0%-p.a.-cash-give-away leaflets every month.

But why should you ignore such great offers? It is 0% p.a. right? Which means you could loan thousands of dollars from the bank to pay your credit card bills and pay no interest for one whole year right? Alas, there is no free lunch in this world, especially not in Singapore. Let's take a look at what these three of the most popular banks in Singapore are offering...

  • UOB
    "Simply transfer your outstanding balances from other banks' credit cards and/or credit lines to us during this festive season and enjoy an exclusive waiver of the 1% processing fee on top of a special interest rate of 2.88% p.a. for 6 months."
    Assuming a loan sum of $10,000, total interest payable for one year = $1,344, which is 13.44% of the loan. (Note that the interest rate of 2.88% p.a. is only applicable for 6 months. Which means that for every month that your loan is outstanding, you need to pay an interest rate of 24% p.a. Minimum transfer is $1,100)

  • OCBC
    "Pick up our 0% p.a. cash Funds Transfer with a choice of 3, 6 or 9 months repayment tenures. You can even repay in a 12-month fixed instalment plan with our 0% p.a. CashWise."
    Assuming a loan sum of $10,000, processing fee for a 12-month Fixed Instalments at 6% and one-time processing fee for CashWise at 6%, total interest payable for one year = $1,200, which is 12% of the loan. (Note that the interest rate of 24% p.a. will apply for all outstanding amount from the monthly Fixed Instalments. Minimum transfer is $500)

  • Standard Chartered
    "With our Funds Transfer at 0% p.a. interest for 24 months at just a nominal fee of 6.5% on the amount transferred, you can have everything your heart desires and more!"
    Assuming a loan sum of $10,000, processing fee for a 12-month tenor at 4%, total interest payable for one year = $400, which is 4% of the loan. (Note that the minimum transfer is $1,000)

Surprised that the "0% p.a. cash" that OCBC is shouting is not really what you had in mind? On top of that, the other trap is there waiting for you if you are unable to pay back the loan in one year. The 24% p.a. interest rate.

Judging from numbers, it appears that the foreign bank Standard Chartered is more sincere in offering you cash where you really have to pay a nett interest of 4% or 6.5% for an one year or two years loan respectively.

Regardless of how interesting these funds transfers are and how very enthusiastic the banks are to remind us of how they can help us to clear our credit cards bills with immediate loans, I still wish that there is an option on the return envelope that states "I do not wish to receive any more fund transfer leaflets" and I could draw a huge tick on the checkbox next to it.

Banks, save paper, save the earth. Save your breath.



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