By Michelle Tay

In an environment where you may be regretting September's purchases and hoping against January layoffs, you perhaps wish there was a way to buy time to repay your credit card bills, or to save a bit on the interest payments.

In fact, a zero per cent interest rate repayment scheme for your credit cards would be a godsend in a recession.

Guess what? It exists.

Banks regularly offer such schemes, called balance transfer or funds transfer, which give promotional rates that typically last six or 12 months. They offer you the chance to pay back your credit card bills at a much lower interest rate than usual - interest-free, to be exact.

Essentially, you transfer the credit card debt with one bank to another line of credit with another bank. Some experts told The Sunday Times that the process is a bit like paying off the Visa with the MasterCard - just at lower interest rates.

The prevailing interest rate at most banks is 24 per cent. If you have a credit card bill of $10,000, the interest payable at that rate for six months will be $1,200, plus any late finance charges you may also incur.

If you transferred this to a bank that charges you no interest for the first six months, but just a one-time processing fee of, say, 2 per cent, the repayment over the same period of time will be $200.

Theoretically, you will owe $1,000 less in interest payments, and you will repay a different bank.

The catch, however, is that if you are unable to repay the balance in full within the promotional pe-

riod, the interest rate goes back up to 24 per cent.

Also, the promotional interest rate is applicable only to the amount transferred and not to amounts subsequently incurred on your credit card.

DBS Bank said: 'Customers revolving on their credit cards or credit lines at banks' prevailing interest rate can take advantage of the balance transfer scheme to reduce their interest charges.'

A revolver is a cardholder who does not make payments in full, but instead rolls them over each month.

Credit Counselling Singapore (CCS), a non-profit organisation that advises people who have problems paying off debts, said almost 40 per cent of credit cardholders here are revolvers.

CCS president Kuo How Nam said a zero per cent interest rate is 'a sweetener to persuade you to transfer the balance', which makes sense if you are paying the prevailing rate of 24 per cent.

But beware the cavalier habit of paying a credit line off with another one. CCS data showed that the average credit card debt of Singaporeans is about $70,000, owed to seven banks.

Mr Kuo said: 'If you are disciplined and you have the funds to pay, by all means go for a balance transfer scheme. I'm a great believer in interest-free periods, especially in this recessionary time when it may be difficult for you to meet your monthly repayments.

'But for heaven's sake, don't go and borrow again on a card that has been paid off.'

Ms Chenise Lim, vice-president of ipac financial planning , warned: 'If you transfer from Bank A to Bank B, cannot make the payments and carry forward to Bank C, you could end up in a worse-off position than before.'

If you have enough funds to pay your bills in a short time and are looking for a way to save on your interest repayments, an interest-free balance transfer scheme might be an option to consider.

Application forms can be found on bank websites.

This article was first published in The Straits Times on December 14, 2008.