Singaporeans are not new when it comes to credit card use. In July 2016, a total of 7,940,471 credit cards existed in the city-state excluding the supplementary cards. Since most Singaporeans have a personal bank account, you must have encountered the enchanted card called Credit Cards. It seems that you can avail anything with a single swipe, however you must understand what it really is to be able to maximize its use and prevent caving in to shopping temptations.
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Credit Cards in Singapore
Credit Cards are unsecured loans offered by banks with terms and conditions which can get tricky. A lot of credit card programmes are offered in Singapore and these also have various appealing perks. Though it seems you can purchase anything just by swiping these plastic cards or sending its details to online merchants, you must remember that it has a credit limit. With a credit card, you can shop both in establishments and e-commerce sites. Some credit cards can also be used to withdraw cash from ATM branches. The biggest credit card issuers are UOB, Citibank and DBS Bank.
To be able to understand how credit cards work, you must know the parties involved every time you use it for transactions. Cardholders are the individuals who are authorised to purchase goods and pay services through credit cards. Cardholders include your spouse and kids with your supplementary cards. The consumer finance companies and banks which issue credit cards are the Card Issuers. The merchants are the shops and e-commerce sites you transact with.
Let’s say, when you buy something online with your credit card, the bank (Merchant Acquirer) will process the transaction with POS terminals. Credit Card Organisations are the middlemen who link the merchant acquirers and card issuers. These are the logos you see in your cards such as Visa and MasterCard.
General Types of Credit Cards
General Purpose Local Currency Credit Cards
These are the standard cards which are categorised as classic, gold and platinum which you can avail depending on your salary range and creditworthiness. Once your credit card gets approved, your spouse and children can have supplementary cards. In case you use your card overseas, all your transactions will be converted into Singaporean Dollars and you will be charged with 1% to 2% for foreign transaction fee. The credit limit will be established by the bank according to your finances.
Prepaid Credit Cards
These are cards not tied to any existing checking account, thus it does not help with building up your credit score. You only need to load money onto the card to be able to use it to purchase stuffs or pay services. There are no minimum payments since all your purchases will be deducted from your card’s balance. You can renew your spending limit by reloading your card.
Limited Purpose Credit Cards
Limited Purpose Cards are used for large merchant partners such as stores and gasoline stations. These are used as credit cards with minimum finance charge and payments. Some of the known Limited Purpose Cards are Takashimaya Cards and DBS Esso Card. Depending on the rules, limits and restrictions of the cards, you can earn discounts, points, privileges and even airline miles which can also expire if you don’t use it.
Business Credit Cards
Businessmen need to keep their transactions separate from their personal life, this is why business credit cards are designed for them.
Student Credit Cards
Specifically designed for college students who do not have any credit score history yet and it is their first time to be a credit card applicant. The cards may come with various perks such as low interest rates on balance transfer.
These are rebates you get every time you use your credit cards in a transaction. The accumulated rebates may be credited each month or per quarter of the year. The more spending you do, the more rebate you can get as the general rate range from 1% to 3%.
Reward points are part of a loyalty scheme to attract more customers to the business. Each merchant can have a different set or terms and guideline with the pointing system. The points can then be exchanged to air miles, gifts and vouchers.
Credit Card Interest
When comparing credit card monthly interest charge, use the Effective Interest Rate (EIR) which usually ranges from 25% to 28%. Various banks start charging interest rates on various period of time. Some banks start charging a month after your credit card got approved, while others start later. This is called the interest free period. Your grace period will be forfeited if you fail to pay your balance from the previous month.
Credit card terms and conditions can be very tricky. Make sure you understand all the conditions and you know all the costs you are incurring to prevent astounding fees. Use credit cards only when you need it the most. If you end up with maxed out credit limits yet you need to make an immediate purchase, do not fret, you can always get a personal loan from Cash Mart.
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