Credit cards come with many features and benefits – a good reason why credit cards are a popular occurrence. If you want to apply for a credit card soon, here are 10 things you definitely need to know. These points will help you better understand how credit cards work and what you can expect from them.
Annual Credit Card Fees
All credit cards offered by banks (at least the main percentage of them) come with an annual fee. The annual fee generally varies from one card to another, even in the case of cards offered by the same bank, as a rule, Premier cards, which offer more favorable conditions than conventional cards, have a higher annual fee.
While the main card almost certainly comes with an annual fee, in most cases additional cards also come with an annual fee. Sometimes the annual fee for an additional card is canceled during the first year or so – this makes the card more competitive and in demand. Some banks also refuse the annual fee for the main card – during the first year or the first two years or longer.
Annual interest rate
All transactions you make with your credit card include a specific interest rate, known as the annual 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 in Singapore is from 23% per annum. and 30% per annum
Banks provide an interest-free period of about 21 days from the date of issue of the statement (again, it depends on the bank and type of card) and do not charge interest if the amount is fully paid off in this interest-free window. If the amount is not paid before the end of the interest-free period, interest payments will be applied accordingly.
Credit cards allow customers to make emergency cash withdrawals at ATMs. These cash advances are subject to a processing fee of approximately 5% -6% of the withdrawn amount, with the exception of interest payments, which are between 23% and 28% per annum. Interest on cash advances is accrued daily at the accrual rate until the amount is fully repaid. Cash advances are usually a risky phenomenon, mainly given the high interest payments. Therefore, if you withdraw money with your credit card, it is recommended that you fully repay the amount as soon as possible.
Minimum monthly payments
As a credit card customer, you are required to pay a minimum amount every month – or the full amount, if possible – in the amount of 3% of the total monthly outstanding balance. Minimum payments must be made by the due date, if you want to avoid late payment fees. The minimum payment on your monthly credit card statement may also include pending minimum payments for previous months, late payment fees, cash advance payments, and limit collection fees, if applicable.
Late payment fee
If the minimum amount is not paid on time, banks charge a fee, usually called a late payment fee. Fee for late payment on credit cards in Singapore can vary from 40 to 80 US dollars, depending on the bank offering the card.
Over Limit Fees
Fees for exceeding the limit are applied and charged by the bank in case of exceeding the established credit limit. Limit fees can range from $ 40 to $ 60 for credit cards in Singapore
Cashbacks and Bonus Points
One of the aspects that makes credit cards quite an interesting phenomenon is the bonus points / cashbacks that you can earn on purchases. Different cards are structured differently and allow you to receive cashback or bonus points, or both on your purchases. Some cards allow you to earn reward points for products, while others allow you to earn cashbacks or reward points when booking airline tickets, retail purchases, etc. Cashbacks and bonus points are features specific to certain credit cards, and the amount of benefits depends from to the type of card and the bank offering the particular card. The reward points earned for purchases can be converted into exciting vouchers, discounts and attractive purchases / retail purchases / online offers from the card rewards catalog.
Some credit cards allow you to transfer the entire balance of your credit card to a specific credit card account, which allows you to consolidate your debt. Credit cards for balance transfer are provided with an interest-free period from 6 months to 1 year, depending on the card for which you applied. In the case of cards with a balance transfer, banks charge a processing fee and may also charge interest (in most cases it is unlikely). After the expiration of the interest-free period (6 months – 1 year depending on the card), the usual interest on the card is applied to cash transactions and advances.
Singapore Air Mile Programs
Some credit cards (mostly premium credit cards) offered by some banks in Singapore allow you to earn airline tickets by converting your reward points from card purchases. Generally, air miles cards come with a higher annual fee due to their premium nature. As a premium credit card customer, you can accumulate enough points to fully compensate for your next vacation!
In short, your credit rating is a prediction of how well you managed your debt in the past. It takes into account your payment schemes and records cases of late payments, exceeding the credit limit, defaults on loans, a history of regular / timely payments, etc., It also gives banks an idea of how well you can handle debt in the future. A good credit rating is vital for approving loan applications and credit cards.
The above points will come in handy if you plan on applying for a credit card. These aspects will help you understand how credit cards work in Singapore and give you a better idea of what you can expect. They will also work if you are unhappy with your current card and want to switch to another credit card.