A credit card is a card issued by banks or credit card providers which can be used to pay for goods and services. Whenever you use a credit card to make purchases, you borrow money from the bank which has to be paid back when your credit card bills are due (usually in 25 to 30 days). If you’re not able to pay back the full sum by the agreed deadline, you owe the bank additional interest on top of what you borrowed. A credit limit, which is the maximum amount available to spend using the credit card, will be set on each credit card. Uses of Credit Cards Credit cards can be used to make purchases, balance transfers (transference of money from one bank account to another) or cash withdrawal from an ATM (automated teller machine). Types of Credit Cards There are many credit cards out there, all uniquely designed with different benefits as well as terms and conditions. When first applying for a credit card, most people hope to find the best credit cards. However, Cardable believes that there is no one best credit card – there is only a credit card that best suits your needs. The main types of credit cards available include:
- Reward credit cards allow cardholders to earn reward points whenever you make payment with your credit cards, be it shopping, dining, travelling or entertainment purchases. These rewards can be used to redeem gifts, vouchers or other goods and services. Rewards credit cards are usually great for cardholders who often pay their credit card statement every month on time. Otherwise, the extra interest incurred would cost more than what is gained from the rewards.
- Cashback credit cards are credit cards that return credits, which are a percentage of the amount you have spent, back to your credit card after purchases with the credit card have been made. Some cashback cards, known as category-based cashback cards, award high cashbacks only for certain categories such as shopping, dining or overseas expenditure. Thus, if any of the categories hold a significantly heavy weighting in your monthly expenditure, you can consider getting those category-based cashback credit cards. However, there are also cards that target a few categories or more, known as tiered-based cashback credit cards. These cards may only award high cashbacks if you spend a minimum amount with your credit card within a month. These cards award cardholders with higher cashbacks whenever you spend more, thus, some may find it to be more straightforward.
- Travel air miles credit cards are popular amongst Singaporeans who often have wanderlust. For those who love to travel everywhere, save on your travelling expenses with credit cards’ air miles rewards. Air miles, when accumulated sufficiently, offers cardholders free airline tickets, or in the least, airline tickets at discounted prices! Additionally, with credit cards benefits becoming more competitive these days, banks are offering many other travel-related benefits and features such as access to VIP lounges worldwide, discounted seat upgrades from economy to business or first class, VIP concierge or discounted hotel and limousine bookings. Some sign-up bonuses may also include free luggage and if that’s what you need, be sure to sign up for those credit cards at the right time! Air miles are generally earned whenever you spend on your credit card. Different credit cards have different rates and they often credit more air miles when you spend overseas. Most of them offer approximately 1.2 air miles for every $1 spent locally and 1.4 air miles for every $1 spent overseas. Recently in Singapore, AMEX and SIA have worked together to enhance their co-branded credit cards to offer better air miles benefits. In order to enjoy the miles, most people have to first create a Frequent Flyer Account as well with the various airlines. Be sure to check the details and fine print of the credit cards!
However, for most people, travel air miles credit card may not be best to earn rewards for your daily expenditure. Thus, browse through good general travel air miles credit cards first. o Love travelling? Find out a little more about travel credit cards
and the things you should take note of on our blog post.
Why you should get a credit card
- Student credit cards are different and great for students mostly because they do not have eligibility criteria of a minimum of 21 years old and an annual income of $20,000 or more. Another benefit is the lower annual credit card fees! These credit cards are also often tailored to suit the needs of students with benefits such as exclusive privileges and free entry at clubs, free drinks, cash rebates at popular merchants well-loved by students e.g. Starbucks or Smoothie King, dining benefits and a host of other privileges. Without a regular income or a lower one, students should try using these cards as the participating merchants are usually not targeted at the higher upper income group. Compare that to high-tiered credit cards that offer cash rewards and benefits at high class dining restaurants and bars, where student normally are not able to afford.
Some people are against credit cards as they believe that it creates a consumerism culture and encourages unhealthy spending habits. However, we believe that credit cards are tools that can help one pay for goods and services more efficiently, and if used wisely, it is capable of helping many people and yourself enjoy great savings. Below are just a few of the advantages of having a credit card instead of cash only.
What you need to know before getting your first credit card
- Make quick and fuss-free payments: Credit cards make it incredibly convenient to buy things and make purchases. Forget scrambling for loose change or notes, just whip out your credit card, insert it and type in your PIN. With even newer tools such as Visa Paywave, just tap your credit card and you’re ready to go.
- Save whenever you spend: Credit cards help you to save more as you spend! Get rewards, discounts, promotions cashbacks or even cash rebates every time you spend with your credit cards. Not to forget air miles, exclusive bank or credit card companies privileges and credit cards sign-up bonuses! As the credit card industry becomes increasingly competitive, most of them offer really generous rewards point allocation and redemption for luxurious, highly-acclaimed and quality goods. With a wide range of credit card promotions, enjoy greater savings with your daily spend – be it dining, shopping, entertainment, travel, lifestyle and much more! Check out the full range of credit card promotions in Singapore on our promotions pages.
- Improve your credit score and history: There are some credit cards specially created to improve one’s credit score rating. With a higher credit score, you will have a higher chance of applying for higher tiered credit cards successfully in future and thus accessing better credit card deals. Note that these credit cards may have higher interest rates as well as lower credit limits. For those with poor or limited credit history, start applying for credit cards today to boost your credit score. Start slow with lower tiered everyday credit cards catered to the general masses.
- What are credit scores? They’re important for your credit card application. Find out more with our 2-minute credit score guide here.
- Keep yourself financially safe and guarded: Credit cards are able to provide the financial protection you need. If you’ve lost a wallet full of cash, it’s difficult to get that money back. However, if you have misplaced your credit cards or became a victim of credit card fraud, credit card companies and banks often provide legal protection such as terminating your credit cards to prevent third parties and frauds from misusing them. They have to refund you any fraudulent payments and transactions at once unless there are evidence and reason not to do so.
- What does one do when they lose their credit card? Equip yourself with some financial survival knowledge. Here are 5 tips you’d wish you had known if you lost your credit card.
- Track your expenditure: Credit cards also allow all your credit card expenditure and purchases to be tracked online with credit card statements. Instead of manually detailing each of your expenditure and extra income every time you make a purchase, go online to check out your online credit card statements and find out at once how much cash you have been withdrawing or spending and the amount of cash you have deposited or earned. Another advantage is to then use software or a wide range of credit card or financial tools to study and analyse your spending profile and habits hence finding areas where you are able to save more money.
If you’re 21 and about start working, you might be looking to get your first credit card. Isn’t it exciting? But we know credit cards are so varied and dynamic, each unique with their own benefits, terms and conditions, rewards and rebates system, that choosing a credit card can be really difficult and confusing. Try to do your homework and research, or use Cardable’s recommendation engine
to find suitable cashback cards that suit your spending habits.
- Be familiar with the benefits, perks and interest rates of your preferred credit cards: Do some research, find out the advantages of those credit cards and consider your different options before finally choosing one. Certain banks may have great benefits and rewards, however on closer inspection, their partner merchants may not be shops that suit your liking and preferences and thus, you wouldn’t frequent them often, rendering that credit card ineffective. Using Cardable’s mobile application on IOS or Android, check out the bulk of the credit card promotion pertaining to specific cards. All you have to do is download, open the app, select a specific credit card under the filter options, and start viewing a list of credit card promotions you can enjoy with that card.
- Read the fine print and the limitations of the cards: Banks and credit card companies often paint a beautiful picture of their credit cards for promotional purposes. However, don’t get too excited and impulsive! The most important details are usually in the fine print and terms and conditions. Some of the more common pitfalls or rules and regulations that are overlooked are details such as minimum spend in specific expenditure categories such as dining or petrol, time frames, caps or limits to cashbacks and rewards, transaction fees, additional memberships, new-to-bank sign-ups or first time credit card applicants. For instance, there are some credit cards with extremely high cashbacks. However, there may be caps on the amount of cashbacks one can earn in a month or there may be a need to spend a certain amount of money with your credit card consecutively for 3 to 6 months before the banks will award you with those cashbacks. Having a clear understanding of how your credit cards work will give you the upper hand when you dispute with the banks over any card issues.
- Get a healthy credit score in order: Credit card issuers will take a look at your credit scores before making a decision to approve your credit card applications or not. Credit scores are able to tell the banks if you’re a responsible and reliable customer. If your credit history records many late payments and debts, banks will form the impression that you are a customer that they will potentially have to worry and chase frequently for payment. How do you get your credit score in shape then? A general rule of thumb is not to make late payments for any credit loans or credit card fee payments. However, simply making credit card payment punctually will not guarantee you a good credit score. Here are some of the 10 myths people often have about credit scores debunked.
- You don’t have to pay annual fees: It’s true. And many people don’t know that. You might be trying to save money in many areas especially if you’re only starting to work. However, there’s no need to be overly concerned with annual fees when you can call up banks to ask for an annual fee waiver. How do you do that? Read this blog post to find out the hidden truth about annual fee waivers and how to get it every time. This trick doesn’t just apply to the first year, it applies to every annual fee you have to pay.
- Check out the interest: The best thing everyone can do, of course, is to pay your credit card bills punctually. However, if for some reason, you’re afraid that you’re not able to do so consistently, take a closer look at the interest rates. Some credit cards have interest rates on the unpaid balance of up to 26% per annum and that is a crazily high amount that no one wants to pay for.
- You might not get approved for every credit card applied: Reality check - as a first time credit card applicant without a solid credit history, some credit card issuers or banks may think twice before approving your application.
- Don’t apply for too many cards at the same time: Some credit card application can take up to months to be processed and approved as the banks need to gather all the necessary information for review. Meanwhile, there is certainly a tendency or temptation to try different credit cards but refrain from doing so all at once! With each application, banks will make an enquiry with the credit bureau into your credit history. A large volume of enquiries may however negatively impact your credit score, which naturally will lower the chances of approval of your credit card applications. Thus, it will be good for you to give a time gap of a few months between applications.
- Be responsible: Now that you’re about to get a credit card, it’s an exciting change and certainly gives most young people a sense of empowerment and financial independence. However, control your finances well and the most important thing is to spend within your limits.