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Your Fail Safe Method for Choosing a Credit Card


Many people put more effort into ordering from a fast food menu than they do choosing their primary credit card. Since a credit card can often turn into the fast lane to debt or excessive overspending, it’s vital that you have a checklist of measures to use in making the right choice.

Maintaining good credit can have great bearing on some of our most important desires, such as buying a home, buying a car, starting a business, and getting lower interest.

There are a number of important personal habits and considerations that should be used when finding a card to best serve your needs. The following is your fail safe method to finding the right credit card for your personal needs.

First, check your credit score. A free copy of your credit score can be accessed at Equifax, Experian or TransUnion, the three major reporting agencies. Because the best cards require very good credit, knowing your score in advance will help define your field of selection.

With credit score in hand, it’s time to consider spending habits. Basic questions to answer are will you pay the full card balance each month or carry a balance? Will this card be used for most household purchases, all large ticket items or only for emergencies?

Annualized percentage rate is the crux to how much you ultimately pay for stuff bought using a card and often is the depth gauge to overall debt level. Cards come with either fixed or variable interest rates, and each has advantages. Preferably, start by choosing a card that offers 0% interest rate for the first 12 months.

Fixed rate cards are just that with the annual percentage rate set at a fixed level. National averages on fixed APR cards range from 16.54% upward to 22.03%. However, credit card companies have the right to increase fixed interest rates at any time per the card agreement.

Variable rate cards have interest rates often stated as an index plus margin. For example, the actual rate charged might be „index + 11.99%“. If the current prime rate index is 4%, the card APR will equal 15.99%. For most people, tying the interest rate to Federal Reserve decisions can be tricky, but it can also be advantageous depending upon how the card is used.

Another important factor in credit card choice is the credit limit, or how much you can charge before reaching the cap. You want a limit that is high enough so you’re not always close to the maximum, especially if you intend to carry a balance. Carrying a balance at the max or charging close the limit cap can have a negative effect on your credit score.

Also, review the card issuers method of computing interest charges. Generally, the average daily balance method is used. The monthly rate is computed by adding all daily balances together and dividing by the number of days in the billing cycle. Using this method, the more days in the cycle will give a lower interest charge. For example:

  • If average daily balance is $225.00 and billing cycle is 25 days, interest charged is 225/25 = 9%.
  • If average daily balance is $225.00 and billing cycle is 30 days, interest charge is 225/30 = 7.5%.

Equally import with interest rate calculation is to know the fees and penalties that can be tacked on to your monthly payment. Transaction fees for transferring a balance from another credit card are common, as are fees charges applied when you pull a cash advance from an ATM using your credit card. Here are common fees to give thought to:

  • annual fee you pay annually for the privilege of using a credit card
  • balance transfer fee is usually between 3% and 4% of amount transferred
  • cash advance fee between 2% and 5%
  • foreign transaction fee is a charge of 3-4% ​

Also, be particularly sensitive to late payment fees. While our intentions are to always make the monthly payment on time, it doesn’t always work out that way. Penalties for missing the payment due day can run from $35.00 to $50.00.

Finally, list the incentives you want a card to offer. Do you need a rewards card paying bonus points every time you make a purchase? If so, will the point accruals be used for travel, merchandise, cash back, or a combination of these? Do you need a card that is geared toward business use or just for everyday purchases? Do you simply need a low interest rate card?€‹

The bottom line is to find a card that will most closely cover you personal spending habits. All of these checkpoints can be covered in short order. Begin by listing your personal needs, highlight your must have requirements, and use the internet to review cards meeting your criteria.

Credit cards come with a host of features and benefits - a good reason why credit cards are a popular phenomenon. If you are looking to apply for a credit card anytime soon, here are 10 things you definitely need to know. These points will give you a better understanding of 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 major percentage of them), come with an annual fee. The annual fee mostly varies from one card to another, even in the case of cards offered by the same bank. Usually, Premier cards that offer better benefits than normal cards come with a higher annual fee.

While the Primary card almost certainly comes with an annual fee, supplementary cards also come with an annual fee in most cases. Sometimes, the annual fee on the supplementary card is waived for the first year or so - this is to keep the card more competitive and in-demand. Certain banks waive the annual fee on the primary card as well - for the first year, or first two years, or longer.

Annual rate of interest

All transactions you make using your credit card attract a certain rate of interest known as the annual percentage rate of interest (APR). The interest rate is dependent on the bank that's offering the card and the type of card. The interest rate for most credit cards is Singapore is between 23% p.a. and 30% p.a.

Banks allow for an interest free period of about 21 days from the release of the statement (again, this depends on the bank and the type of card) and don't charge an interest if the amount is repaid in full within this interest free window. If the amount isn't paid before the end of the interest free period, interest charges will accordingly hold applicable.

Cash advance charges

Credit cards enable customers to make emergency cash withdrawals from ATMs. These cash advances carry a handling charge of about 5%-6% of the withdrawn amount, besides interest charges that fall in the range between 23% and 28% p.a. Interest on cash advances is computed on a daily basis at a compounding rate until the amount is repaid in full. Cash advances are usually a risky phenomenon, mostly considering the high interest charges. So if you withdraw money using your credit card, it is advisable that you repay the amount in full at the earliest.

Minimum monthly payments

As a credit card customer, you are required to pay a minimum amount each month - or the entire amount if that's possible - amounting to 3% of the total monthly outstanding balance. Minimum payments need to be made by the payment due date if late payment charges have to avoided. The minimum payment in your credit card monthly statement can also include pending minimum payments from previous months, late payment charges, cash advance charges, and overlimit fees, if they hold applicable.

Late payment charges

If the minimum amount isn't paid by the payment due date, banks levy a certain fee, commonly referred to as the late payment fee. The late payment fee for credit cards in Singapore can be anywhere in the range between S$40 and S$80, depending on the bank offering the card.

Overlimit fees

Overlimit fees hold applicable and are levied by the bank if the allocated credit limit is exceeded. Overlimit fees can range between S$40 and S$60 for credit cards in Singapore.

Cashbacks and reward points

An aspect that makes credit-cards a pretty exciting phenomenon is the reward points/cashbacks that can be earned on purchases. Different cards are structured differently and allow you to earn either cashbacks or reward points or both, on your purchases. Some cards allow you to earn reward points on groceries, while some other let you earn cashbacks or reward points on air ticket bookings, retail purchases, etc. Cashbacks and reward points are features that are specific to certain credit cards and the extent of benefits depends on the type of card and the bank offering the particular card. Reward points earned on purchases can be converted into exciting vouchers, discounts and attractive shopping/retail purchase/online deals from the card's rewards catalogue.

Balance transfers

Certain credit cards allow you to transfer your entire credit card balance to that particular credit card account, enabling you to consolidate your debt. Balance transfer credit cards come with an interest free period of 6 months - 1 year, depending on the card you've applied for. In the case of balance transfer cards, banks charge a processing fee and might also charge an interest (unlikely in a majority of cases). After the interest free period (6 months - 1 year depending on the card), normal interest charges on the card are applicable for transactions and cash advances.

Air miles programmes in Singapore

Certain credit cards (mostly premium credit cards) offered by some banks in Singapore allow you to earn air miles by converting your reward points earned on purchases using the card. Usually, air miles cards come with a higher annual fee owing to their premium nature. As a customer of a premium credit card, you can accumulate enough air mile points to completely offset your next vacation!

Credit scores

In brief, your credit score is a projection of how well you've managed your debt in the past. It takes into account your payment patterns and records instances of late payments, credit overlimits, loan defaults, history of regular/timely payments, etc, and gives banks an idea of how good you can be at handling debt in the future. A good credit score is vital to getting loan applications and credit card applications approved.

The above mentioned points will come in handy if you are contemplating applying for a credit card. These aspects will give you a comprehensive 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 happy with your current card and are looking to switch over to another credit card as well.