Credit cards offer many features and benefits, which is why credit cards are a popular phenomenon. If you want to apply for a credit card soon, here are 10 things you absolutely must know. These points will help you better understand how credit cards work and what you can expect.
Annual charge on credit cards
All credit cards offered by banks (at least a significant percentage of them) carry an annual fee. Annual fees generally vary from one card to another, even in the case of cards offered by the same bank. Usually, Premier cards with better benefits than normal cards result in higher annual fees.
Although the main card almost certainly comes with an annual fee, additional cards also come with an annual fee in most cases. Sometimes the annual fee on the additional card is removed during the first year or so, in order to keep the card more competitive and more in demand. Some banks also waive the annual fees of the main card – the first year, the first two years or more.
Annual interest rate
All transactions you make with your credit card result in a certain interest rate, called the annual percentage rate of charge (APR). The interest rate depends on the bank offering the card and the type of card. The interest rate of most credit cards in Singapore is between 23% per year. and 30% p.a.
Banks allow an interest-free period of approximately 21 days from the date of the statement (again, it depends on the bank and the type of card) and does not charge interest if the amount is refunded in full in this window without interest. . If the amount is not paid before the end of the interest free period, the interest charges will still apply.
Cash Advance Fee
Credit cards allow customers to make emergency withdrawals at ATMs. These cash advances incur a management fee of approximately 5% to 6% of the amount withdrawn, in addition to interest charges ranging from 23% to 28% pa. Interest on cash advances is calculated daily at a compound rate. until the amount is fully repaid. Cash advances are generally a risky phenomenon, mainly because of high interest charges. So if you withdraw money using your credit card, it is advisable to refund the full amount at the earliest.
Minimum monthly payments
As a credit card customer, you must pay a minimum amount each month – or the total amount if this is possible – corresponding to 3% of the total unpaid monthly balance. Minimum payments must be made before the due date if late payment charges are to be avoided. The minimum payment on your monthly credit card statement may also include minimum payments outstanding from previous months, late payment charges, cash advance fees and overlimit fees, if applicable.
Late payment fees
If the minimum amount is not paid by the due date, the banks charge fees, commonly known as late fees. Late payment fees for credit cards in Singapore can range from S $ 40 to S $ 80, depending on the bank offering the card.
Overlimit charges apply and are collected by the bank if the credit limit is exceeded. Overlimit fees can range from $ 40 to $ 60 for Singapore credit cards.
Cashbacks and reward points
The reward points / cash back that can be earned on purchases are an aspect that makes credit cards a pretty exciting phenomenon. Different cards are structured differently and allow you to earn either cash back, reward points, or both, on your purchases. Some cards allow you to earn reward points on races, while others allow you to earn cashbacks or reward points on airline ticket bookings, retail purchases, and more. Cashbacks and loyalty points are features specific to certain credit cards. on the type of card and the bank offering the card in question. Reward points earned on purchases can be converted into vouchers, discounts and shopping / retail / attractive online offers from the card's reward catalog.
Some credit cards allow you to transfer all of your balance to this account, allowing you to consolidate your debt. Balance transfer credit cards come with an interest free period of 6 months to 1 year, depending on the card you requested. In the case of balance transfer cards, banks charge a processing fee and may also charge interest (unlikely in the majority of cases). After the interest-free period (from 6 months to 1 year depending on the card), normal interest charges on the card apply to transactions and cash advances.
Air miles programs in Singapore
Some credit cards (mainly premium credit cards) offered by some banks in Singapore allow you to earn airline miles by converting your loyalty points earned on purchases made with the card. Usually, airline miles cards entail higher annual fees because of their premium nature. As a customer of a premium credit card, you can accumulate enough air points to completely offset your next vacation!
In short, your credit score is a projection of how you have handled your debt in the past. It takes into account your payment habits and records late payment cases, credit limits, loan repayment defaults, history of regular / one-off payments, etc., and gives banks an idea of your ability to manage your debts in the future. A good credit score is essential to get a loan application and credit card approved applications.
The points mentioned above will be helpful if you are considering applying for a credit card. These aspects will give you a complete understanding of how credit cards work in Singapore, giving you a better idea of what you can expect. These will also work if you are not satisfied with your current card and would like to also switch to another credit card.