This article was written in collaboration with SingSaver. SingSaver is also an affiliate partner of DollarsAndSense.sg. Views expressed in this article are the independent opinion of DollarsAndSense.sg.
In Singapore, one of the first things people do after getting their first job is to apply for a credit card. It makes perfect sense – paying with a credit card allows them to enjoy many benefits that using cash wouldn’t provide. This includes rewards such as cashbacks, miles or points as well as greater convenience and safety.
In the past, carrying credit cards were considered one of the elusive “5Cs” that people in Singapore worked hard to attain. Today, owning a credit card is not only the norm, but the financially-savvy option.
But before you apply for your first credit card, here are a few important things that you should know.
# 1 Minimum Salary Requirement
Most credit cards in Singapore require users to earn a minimum income of $30,000 per annum. That is equivalent to a monthly salary of $2,500, or even lower if you typically receive a 13th month bonus every year.
When you apply for a credit card, most banks will require you to furnish documents as a proof of income. These include 1) CPF statement 2) pay slips and 3) income tax returns (if applicable).
There are also many other cards which have higher minimum income requirements. To check which cards you qualify for based on your current level of annual income, you can use credit card comparison platforms such as SingSaver, to help sort through more than 100 credit cards across all major banks in Singapore.
# 2 Late Payment Fee & Interest Charge
While credit cards offer great features and rewards, you must ensure you always pay bills on time and in full. If you fail to do so, you will likely incur the following fees.
Late Payment Fee:
For all credit card billings, there is usually a minimum payment amount required. This amount is usually the higher of either $50 or 3% of your current balance. If your current balance is less than $50, the minimum payment will be your balance.
Failing to make the minimum payment required by the due date will typically mean that a late payment fee of between $80 to $100 will be slapped on your outstanding balance.
Interest charges (also known as financing charges) are payable on any outstanding amount that you still owe after the due date. At an effective interest rate of up to 28% per annum, these rates can be extremely pricey.
For example, if you forget or are unable to pay your credit card bill by its due date, you will be charged both 1) the late payment fee (as you failed to pay the minimum amount on time) and 2) the interest charge.
Contrary to popular belief, it’s not guaranteed that you will be able to get your bank to waive the interest and late payment fees, especially if you often miss the due dates. The best way to avoid these costs is to always pay your bills on time and in full. Make this a habit.
# 3 Your Credit Score
Banks in Singapore keep track of all credit usage that they have with their customers. This information is then aggregated with a centralised organization, the Credit Bureau Singapore (CBS).
This means that once you apply for your first credit card, you will start building your credit score. The score ranges from 1000 – 2000. The higher the number, the better your credit score. Your score is determined based on an algorithm that CBS has in place. Some factors that impact your score include Utilisation Pattern; Recent Credit; Late Payment; Credit Account History; Available Credit and Enquiry Activities.
It’s important to keep a good credit score when you are young as this will affect your ability to secure a bank loan in the future. You do not want your forgetfulness or bad habits of consistently missing due dates or not being able to repay your credit card bills to affect your ability to secure a housing or motor vehicle loan in the future.
# 4 Choose Your Benefits Wisely
One of the biggest reasons to use credit cards is to enjoy the rewards that come with it. Different cards offer different benefits, hence, it’s important that you choose cards that will give you the benefits that you want most.
If you want to start accumulating air miles so that you can enjoy free or upgraded air travel in the future, you should be using credit cards that offer miles. One such card is the American Express KrisFlyer Card.
This card not only earns you 1.1 miles for every $1 spent locally, but also gives you a bonus of 5,000 miles upon your first spend, and an additional 7,500 miles when you spend $2,500 in the first three months upon card approval.
Those who are less likely to travel or prefer seeing their rewards instantly can opt for cashback cards instead. An example of a cashback card is the Standard Chartered Unlimited Card, which gives you a 1.5% cashback on all your spend.
In other words, you are basically getting an immediate 1.5% discount each time you use this card, as opposed to paying by cash. The best part about the card is that unlike many other cashback cards, there is no minimum spending required or cap that limits your cashback.
Credit card platforms, such as SingSaver, can help you screen for the best credit cards to apply for based on the type of benefits that you prefer. You can also find appropriate cards based on the type of spending you are likely to make, be it on shopping, food, travel or daily expenses.
Additional Benefits For The Credit Cards That You Want
From time-to-time, credit card companies will offer new customers additional promotions, on top of the usual welcome offers. The best place to find these latest deals are on credit card comparison sites like SingSaver.
Don’t miss out on the additional benefits just because you applied at the wrong time, or through the wrong credit card comparison site!