How Credit Card Balance Transfer Works

4 min read By eCompareMo on May 19, 2020

Are you overwhelmed by the amount you need to pay on your current card? Are the overlapping payment schedules of your multiple cards bogging you down? Consolidate your debts and make your payment terms manageable by applying for a credit card balance transfer.

What is a credit card balance transfer?

Balance transfer refers to the process of transferring a current debt from one credit card to another. Usually, this is done because the receiving card has a more affordable interest rate than the original card. The process then helps the cardholders to pay off their balances at a cheaper price and on easier repayment terms.

Credit card balance transfer works like a regular card payment, with specific monthly amount of payment and a structured duration of requital set. These elements follow a prior arrangement between the cardholder and the bank. With balance transfer, the cardholder makes a financial adjustment to his/her favor.

For example, a cardholder has an outstanding balance of ₱60,000 on Credit Card X, and the situation is that you can only settle a fraction of it (let’s say, hypothetically: ₱15,000 from the total balance). As a result, you will be paying the interest on the remaining ₱45,000 and the next purchases on top of that amount.

Now, to solve this problem, you can resort to credit card balance transfer. From Card X to Card Y, you can move the total amount of ₱60,000 at a balance transfer rate, which commonly has a value lower than a regular interest rate.

This balance in the new card must be paid off in equal fractions per month (and a fixed interest rate) as per the time frame or repayment structure agreed during the transfer application.

However, exercise this with extreme caution: a balance transfer is not an additional line of credit, and you might go over your credit limit.

Benefits of balance transfer in credit cards

The benefits of balance transfer make paying back a loan a smoother process. Here are the ways it can help you:

• It reduces the interest rate placed on your credit card, which means the balance is relatively diminished.
• It consolidates all your credit card payments to avoid incurring late fees or delinquency, especially if you have a habit of forgetting dates or deadlines.
• This scheme will arrange your payment into more manageable terms that let you use your budget more efficiently.
• The consolidation gives you a figure of how much to allocate on your budget and when to save or splurge.
• It keeps you away from the red flags, especially with the usage of multiple credit cards.

Balance transfer rates (monthly add-on)

Here are the balance transfer monthly add-on rates from major banks* in the Philippines:

1. AUB

• 1.3% for 12-month repayment terms with a minimum of ₱3,000
• 1.5% for six-month repayment terms with a minimum of ₱3,000

2. Bank of Commerce

• 0.60% for 24-month repayment terms with a minimum of ₱5,000
• 0.88% for 12-month repayment terms with a minimum of ₱5,000
• 1.30% for six-month repayment terms with a minimum of ₱10,000
• 1.30% for three-month repayment terms with a minimum of ₱20,000

3. BDO

For a minimum of ₱20,000 on your BDO credit card:

• 0.79% for 12, 18, and 24 months of repayment terms
• 0.95% for six months of repayment terms
• 1.30% for three months of repayment terms

For an amount between ₱5,000 and ₱19,000:

• 2.00% for three months of repayment terms
• 1.80% for six months of repayment terms
• 1.75% for 12 months of repayment terms
• 2.00% for 18 months of repayment terms
• 2.15% for 24 months of repayment terms

4. Bank of the Philippine Islands

For BPI credit cards:

• 0.99% for 36 months of repayment plans
• 1.50% for 6, 12, 18, and 24 months of repayment plans

5. China Bank

For a minimum of ₱3,000:

• 1.00% for repayment terms of 12, 18, and 24 months
• 1.25% for a repayment term of 3, 6, and 9 months

6. Citi

• 0.99% for all repayment terms available at 6, 12, 18, 24, 36, 48, and 60 months
• ₱250 disbursement fee for each approved transaction

7. EastWest Bank

• 0.9% for most types of EastWest credit cards

8. HSBC

• 0% for three to six months for HSBC credit cards

9. Maybank

• 0.60% up to all repayment terms of 3, 6, 12, 18, or 24 months

10. Metrobank

• 0.99% to all repayment plans that may reach up to 60 months, for Metrobank credit cards

11. RCBC

The minimum required for RCBC credit cards is ₱5,000:

• 0.89% to repayment plans lasting for 12 to 36 months
• 0.99% to repayment plans lasting for 3 to 9 months

12. Security Bank

• 0% introductory rate for new applicants
• 2.25% for repayment terms of 3 months
• 2.00% for terms of 6 months
• 1.93% for 9 months
• 1.91% for 12 months
• 2.03% for 18 months
• 2.06% for 24 months

Those banks excluded from the list may not have disclosed interest rates online for public access.

Tips before applying for a balance transfer

These are the things you need to learn first before resorting to credit card balance transfer:

1. Know the applicable rates and figures.

Understand the fees of balance transfer applicable to the cards you will be using. Can you afford the amount on the agreed repayment plan? Is the amount to be moved within the other card’s credit limit? It is also best to ask for computation or breakdown of the transfer rates to better understand your financial obligations.

2. Compare all the bank fees.

Banks vary when it comes to the application process and rates offered, depending on the chosen payment structure. Giving a 0% introductory rate is common among card providers, but some also charge disbursement fees. Always review rates from different banks to make the most out of your decisions.

3. Pay as scheduled.

Balance transfer makes your repayment plans more financially manageable: there’s no excuse to not pay on time. It also involves multiple cards, and so better keep the schedule for each organized. Mishandling your transferred balances can backfire in worse ways.

4. Stay in check of your card balances.

Don’t stop making regular payment of the credit card (source of balance) until it shows zero amount, meaning the balance has been transferred over the new one. Also, keep yourself informed on restrictions and agreement terms.