Singaporeans are not new when it comes to credit card use. In July 2016, 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. First, however, you must understand what it really is to be able to maximise its use and prevent caving into shopping temptations.
Credit Cards are unsecured loans offered by banks with terms and conditions, which can get tricky. However, many credit card programmes offered in Singapore also have various appealing perks. Though it seems you can purchase anything just by swiping these plastic cards or sending their details to online merchants, you must remember that it has a credit limit. You can shop both in establishments and e-commerce sites with a credit card. Also, you can use some credit cards to withdraw cash from ATM branches. The biggest credit card issuers are UOB, Citibank and DBS Bank.
To understand how credit cards work, you must know the parties involved every time you use them for transactions. Cardholders are the individuals authorised to purchase goods and pay for 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 Card Issuers. The merchants are the shops and e-commerce sites you transact with.
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 on your cards, such as Visa and MasterCard.
These are the standard cards categorised as classic, gold and platinum, which you can avail of depending on your salary range and creditworthiness. Once your credit card gets approved, your spouse and children can have supplementary cards. If you use your card overseas, all your transactions will be converted into Singaporean Dollars, and you will be charged 1% to 2% for a foreign transaction fee. The bank will establish the credit limit according to your finances.
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 stuff or pay for 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 Cards are used for large merchant partners such as stores and gasoline stations. Use these credit cards with minimum finance charge and payments. Some 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 them.
People in business need to keep their transactions separate from their personal life. That is why business credit cards are designed for them.
The design is for college students who do not have any credit score history yet, and it is their first time being a credit card applicant. In addition, the cards may come with various perks, such as low-interest rates on balance transfers.
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 of terms and guidelines with the pointing system. The points can then be exchanged for air miles, gifts and vouchers.
When comparing credit card monthly interest charges, use the Effective Interest Rate (EIR), which usually ranges from 25% to 28%. Various banks start charging interest rates at various periods. Some banks start charging a month after your credit card gets approved, while others start later. It is an 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. That’s why you need to know about credit cards. Ensure you understand all the conditions and know all the costs you incur to prevent outstanding fees. Use credit cards only when you need them the most. If you end up with maxed-out credit limits yet need to make an immediate purchase. Do not fret. You can always get a personal loan from Cash Mart.