Almost every working Singaporean has a credit card. However, not every credit card holder knows that there is more in the plastic card hidden in the very fine prints. Banks make money from credit card holders through interest rates. But there are a lot of other charges you have to know to avoid unnecessary fees. Learn the 10 surprising ways banks make money from credit card holders.
First, let’s set things straight with credit cards. Have you applied for a credit card from the known credit card issuers in Singapore (Maybank, ANZ, Standard Charter, DBS, UOB, and OCBC)? These brands evaluate your financial status and creditworthiness before being approved. Your credit limit will greatly depend on your credit score and gross income.
Whenever you make a purchase charged on the card, the bank actually pays the merchant in your stead. The bank then gives you a grace period to pay the bill on the given due date. NO INTEREST will be charged to your account. But keep in mind as long as you settle the bill on or before the due date.
Remember that every time you use your credit card for shopping in stores, your card is swiped (for cards with electronic strips), dipped or tapped (for credit cards with EMV Chips) in credit card readers. These terminals are not owned by the merchants. They rent these readers or POS terminals from banks for a certain fee. Some retailers have charged transaction fees aside from their rent. Though they are not allowed, some merchants charge higher prices on credit card holders compared to the cash payers. This way, they can at least make up for the rent.
Annual fees are from the principal credit cards. These are membership fees paid by the cardholders to continue using their credit cards and get the benefits. Most credit cards waive the annual fees for the first year. Some credit cards have no annual fees for life.
Shop around and see which cards offer to waive annual fees if you spend a certain total amount for a year. Some cards give rewards, cashback, discounts, or miles to holders who pay the annual fees. Take note that even if you don’t usually use the card, you will still be charged an annual fee.
The supplementary cards you give to your family and loved ones also have annual fees. These fees are usually lower than that of the principal card since the principal card has more benefits and a higher credit limit. Make sure to check if your supplementary cards have waived annual fees.
Remember the bank representative near MRT stations who offer credit cards and promises a faster application process? Have you ever wondered if banks really make money by sending these people there smartly dressed up? They actually make money in various ways. Some Singaporeans sign up for credit cards. But you will be surprised to receive a couple of cards right at their doorstep. They hadn’t realized that they had signed up for multiple credit lines.
We all know that every charged amount on the card has to be paid eventually. However, most banks will assure you that if you pay the minimum amount, there are no late payment charges. A lot of Singaporeans take the bait. You pay just the required minimum amount. Then, pay the rest of the bill whenever it is convenient.
A lot of card issuers do not point out that your outstanding balance will still have an interest rate. So don’t wait up for the next bill. Pay your balance as soon as possible. Or else, your credit score will receive a serious blow.
Yes, it is indeed 0% interest. But you should know that it has a catch. Whatever you charge with 0% Interest Installment Plans has an effect against your credit limit. Any rewards or cashback is waived. While there is interest no though you pay the amount in instalment, you still have an administration fee. Should you want to cancel the card or settle the balance at an earlier date, you will have to pay a hefty fine.
Credit cards give you the ability to withdraw cash in ATMs against your credit limit. It is simply getting a short-term loan. However, take note that it has a higher interest rate compared to your credit card’s interest. Also, expect a cash advance fee.
There are times when a Singaporean can’t pay the outstanding balance. So, they choose to transfer the amount to another card. It may save you from snowballing debt from the first card. But remember that you will still pay a processing fee.
Late payment penalties are charged if you fail to pay even the minimum amount. It is different from the interest rate.
Foreign currencies charged on your card can be either overseas or just online shopping. You usually just consider the converted amount to Singaporean dollars. Do not be surprised with a higher bill than expected. The foreign transaction fee is the basis for the expense.
Now that you know how the bank can get your money from your pocket, you can evade some of them by being a wise credit card holder. If you prefer cash, you can get a loan from Cash Mart today.