Hi all, you have to be very careful when you do balance transfer. I was earlier kinda keen on this product but when I know the actual T&C, it really pull me off.
I wanted to get the handphone by transfering RM6k to my Ambank card. There is no transaction/administration cost. Wow that's great! More over I will be given a free handphone SE K550i worth RM849! AND interest rate of 8.99% pa ONLY!
Please be aware, this balance transfer is a bit different then the rest. Its based on a installment amount. Eg of normal balance transfer is that if you transfer RM6000 for 2 years, everymonth you only have to pay the minimum 5% and the interest rate. On another hand, this Ambank product converts RM6000 and interest of RM1078.80 (8.99% X RM6000 X 2 years) into 24 installment loans which each month you have to pay RM294.95 ( RM6000+RM1078.80 / 24 Months)as installment. Imagine, if you pay 8.99% interest per annum based on principle of RM6000 but effectively you are only borrowing RM3000 per annum (due to the reason that you have to service your principle amount every month). On net effect you are actually charged 8.99%X2=17.98% (normal interest is actually 18%pa, thus there is almost none different).
Wow, let see..... paying interest of RM1078.80 for a phone worth RM849. Well well if you have debt anyway and haven't done any balance transfer, they why not do this balance transfer and get some free gift. BUT if you have the cash, I rather buy by cash rather than this balance transfer. At least I get to choose more phone rather than SE K550i.
P/S: I do not consider compounding effect in this calculation for easy understanding (I hope I really had made it easier for you). Finally this post doesn't mean to condemn any product in the market, only trying to bring awareness to everyone. Thanks
Questions and Answer
1) Nova, I don't understand how the effective borring becomes RM3k when I actually transfer (borrow) RM6K from the bank, please explain in detail. Thanks.
Please refer to a simple table that I had done below:-
Scenario 1:-If you borrowed RM6K, but you have to make payment of RM500 every month ( RM6K/12 months), therefore the amount of borrowing every month is lesser. If you take the average of borrowing amount every month (which is lesser each month), effectively you are borrowing only RM3K ((RM3250+RM2750)/2) in a year.
Scenario 2:-
Ok maybe you are lost still... lets compare to a normal situation. Your good friend lend you RM6K as per scenario 2. He said, hey VS I lend you RM6K for one year... please remember to return RM6K to me at the end of the year. Since you are not paying any installment to him along the year. Therefore effectively, you are really borrowing RM6K a year. Because everyday when you wake up from the bed, you are still owing him RM6K until you payback all.
P/S: Sorry if the table above is too small to view. Now you know I am not a good artist. I guess that's what they said the different between people who uses left brain more than right brain. :)
