Credit cards come with a number of features and benefits, a good reason why credit cards are a popular phenomenon. If you are looking to apply for a credit card in the short term, here are 10 things you should definitely know. These points will help you better understand how credit cards work and what you can expect from them.
Annual fees on credit cards
All credit cards offered by banks (at least a significant percentage of them) have an annual fee. The annual fee varies mainly from one card to another, even in the case of cards offered by the same bank. In general, Premier cards that offer better benefits than regular cards have a higher annual fee.
While the main card almost certainly comes with an annual fee, the add-on cards also come with an annual fee in most cases. Sometimes the annual fee for the add-on card is waived for the first year or so, this is to keep the card more competitive and in demand. Certain banks also waive the annual fee for the primary card, for the first year, the first two years or more.
Annual interest rate
All transactions you make with your credit card attract a certain rate of interest known as the annual percentage interest rate (APR). The interest rate depends on the bank offering the card and the type of card. The interest rate for most credit cards is Singapore, between 23% per year and 30% per year.
Banks allow an interest-free period of approximately 21 days from the publication of the statement (again, this depends on the bank and the type of card) and do not charge interest if the amount is paid in full within this window without interests. . If the amount is not paid before the end of the interest-free period, the interest charges will still apply.
Cash advance charges
Credit cards allow customers to make emergency cash withdrawals from ATMs. These cash advances carry a handling fee of approximately 5% -6% of the amount withdrawn, in addition to interest charges that fall in the range of 23% to 28% per year. Interest on cash advances are calculated daily at a compound rate until the amount is fully repaid. Cash advances are often a risky phenomenon, especially considering the high interest charges. Therefore, if you withdraw money with your credit card, it is advisable that you refund the full amount as soon as possible.
Minimum monthly payments
As a credit card customer, you must pay a minimum amount each month, or the full amount if possible, which amounts to 3% of the total monthly outstanding balance. Minimum payments must be made before the payment due date if late fees are to be avoided. The minimum payment on your monthly credit card statement may also include minimum payments due from previous months, late fees, cash advance fees, and over-limit fees, if applicable.
Late payment charges
If the minimum amount is not paid before the payment due date, banks charge a certain fee, commonly known as a late fee. The late fee for credit cards in Singapore can range from S $ 40 to S $ 80, depending on the bank offering the card.
Charges over the limit
Over-limit fees remain applicable and are charged by the bank if the assigned credit limit is exceeded. Over-limit fees can range from S $ 40 to S $ 60 for credit cards in Singapore.
Cashbacks and reward points
One aspect that makes credit cards quite an interesting phenomenon is the reward / rebate points that can be earned on purchases. Different cards are structured differently and allow you to earn cash back or reward points, or both, on your purchases. Some cards allow you to earn reward points on groceries, while others allow you to earn cash back or reward points on airline ticket reservations, retail purchases, etc. Cash back and reward points are features that are specific to certain credit cards and the scope of benefits depends on the type of card and the bank that offers the particular card. Reward points earned on purchases can be converted into exciting coupons, discounts, and attractive shopping / retail purchases / online offers from the card’s rewards catalog.
Balance transfers
Some credit cards allow you to transfer your entire credit card balance to that particular credit card 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 have applied for. In the case of balance transfer cards, banks charge a processing fee and may also charge interest (unlikely in most cases). After the interest-free period (6 months – 1 year, depending on the card), the normal interest charges on the card apply for transactions and cash advances.
Air Mileage Programs in Singapore
Certain credit cards (mainly premium credit cards) offered by some banks in Singapore allow you to earn airline miles by converting your earned reward points into card purchases. Generally, airline miles cards have a higher annual fee due to their premium nature. As a premium credit card customer, you can accumulate enough airline miles points to fully offset your next vacation.
Credit scores
In short, your credit score is a projection of how well you have managed your debt in the past. It takes into account your payment patterns and records instances of late payments, credit limits, loan defaults, history of regular / on-time payments, etc., and gives banks an idea of how good you can be at handling debt in the future. future. A good credit score is vital for loan applications and credit card applications to be approved.
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 to expect. These will also work if you are unhappy with your current card and want to switch to another credit card as well.