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Interest-Free Instalments On Your Credit Card: 7 Important Things You Need To Know

You’ve probably heard this before: there’s no such thing as free…


This post was updated on 18 September 2018 to include updated information.

According to the Singapore Department of Statistics, Singapore households had close to $10.6 billion in credit and charge card liabilities in the 2nd quarter of 2017. Approximately $2.2 billion of this amount is owed by people who have piled up debt that exceeded 24 times their monthly salaries, making it tough for them to pay it back.

Taking up interest-free instalments could very well be one of the reasons people get into such financial predicaments. You’ll find yourself being offered such deals in stores. You’ll try to debate the pros and cons, wondering what the catch is. You’re told that there is none because it’s interest-free. Sometimes, in the spur of the moment, we become weak and let ourselves be coerced into making the purchase – especially if it’s over a dream television set, European holiday or gym membership.

In your heart of hearts, you’ve always known there was more than met the eye. Before signing for another interest-free instalment plan, understand these seven things about how they will impact your long-term financial well-being, especially if used wrongly.

Read Also: Complete Guide To Choosing Credit Cards In Singapore

#1 You Are Being Mentally Groomed Into Thinking This Behaviour Is Fine; And Will Likely Make More Such Purchases

For many people, interest-free instalments offer an easy solution to purchase products and services that you want right away. By receiving instant gratification where you would often need to save for months to afford, you are actually being groomed into thinking such actions are acceptable and will likely make more purchases on similar terms.

You derive happiness instantly and this may lead you to recklessly continue down this path for other things that you also want to buy. The problem is that by doing this, the amount you have to repay each month will snowball, and you will not likely see a problem…until it’s too late.

Read Also: 5 Financial Traps Of Online Shopping: How You’re Being Made To Spend More And How You Can Avoid It

#2 Your Available Credit Limit Will Be Lower

When you make a charge on your credit card, your available credit will be affected. What this means is that if you have a credit limit of $5,000, and your purchase is for a $4,500 gym membership over three years, you would only be allowed to spend $500 on that credit card, until you progressively make payments.

Of course, this is only a problem if you have one or two credit cards, or if you intend to make important big-ticket payments for a wedding or an upcoming holiday trip. You would hate to step into such a situation and realise you’ve used up your entire credit limit or have to use another card you don’t get as good a deal on at the last minute.

Of course, the TDSR (Total Debt Servicing Ratio) in Singapore means your score will also be impacted. And the amount it will be impacted by is the entire $4,500 gym membership over three years rather than the monthly $125 repayments.

This is because when you take up such a deal, the banks pay the companies the entire amount and you’re left with the debt to settle with the bank.

Read Also: Best Credit Cards in Singapore: Here Are the Top 3 Answers We Received From Our Readers

#3 You’ll Be Asked To Pay Some Fees, But You Already Kinda Knew This

In many cases, but not always, there will be some kind of fee worked into the charges you have to incur. This will likely be in the form of a processing fee or an administrative fee. In some occasions, they could even be a percentage of the amount you’re going to park under the interest-free instalment plan.

Again, you cannot really say you didn’t expect this was coming. The problem is that you will likely only know about this after discussing the whole plan and being sold on the deal. In other words, you’re already watching your favourite Netflix show on your new TV in your head by the time they actually tell you about these fees. By this time, you’d have invested too much time and emotions to let the commonly charged 1.5% to 5.0% fees affect your decision.

#4 If You Are Late In Your Payments, Expect Hefty Late Fees and Interest Charges

If you already find it hard to make repayments, it is likely you’ve already made too many purchases on instalment-free schemes. You should stop signing for any more products and focus on making your repayments.

This is because if you miss a payment, you’ll be charged a late payment fee as well as interest charges. You’ll also realise that this interest charge is not only for the amount that you couldn’t repay for the month, but for the entire outstanding amount with the bank, including the entire remainder of your purchase.

Read Also: What Happens When You File For Bankruptcy in Singapore?

This also applies if you’ve simply forgotten to make payment on time. If you press hard enough, you may be able to get them to waive this if you’ve always been a good customer. Of course, this isn’t guaranteed, and you should not take any chances.

#5 Rewards (Air Miles, Cashbacks Or Points) Are Typically Not Given With Such Purchases

Most of the time, you will not receive any rewards for such purchases. You know there are some cards that do still give you’re the rewards, but they are few and far between.

This point is to be expected – the banks have made the entire payment upfront for you, and they need to earn some money. One way to “earn” is to limit the rewards they pay to you. Of course, they could have other methods, including the processing fees or late payment fees or even having a win-win payment structure with the merchants.

#6 Still Liable For Payments Even If You’re Unhappy With What You’ve Bought

For a long time, this wasn’t common knowledge. While it still flies under the radar, many were caught out when California Fitness abruptly closed down its branches in mid-2016.

Those who had opted to pay discounted memberships by getting deals spanning several years, and then using credit cards for instalment-free plans were burnt. They had to continue forking out monthly payments even though they obviously could not use their memberships anymore.

You have to understand that your payment terms is now with the bank instead of the merchant.

The same thing will apply if you buy an electronics product from Courts. If you’re not happy with the product, you cannot stop paying for it. You have to seek recourse with the merchant, Courts in this case, rather than with the bank.

#7 You Can’t Cancel Your Credit Card Now… So Expect To Be Slapped With Membership Fees

If you’ve signed for instalment plans spanning several years, you should be aware that you cannot cancel that credit card in that period, which means you will likely have to pay its membership fees. This is, of course, another way that the banks can earn revenue from you, their customers.

In some occasions, if you continue being a good customer or have spent a sizeable portion on other purchases on the card, they may still waive these fees. But don’t bank on it.

Prepayment is also usually not an option. Yes, banks do not want your money early – one reason could be to earn from membership fees. Other reasons could include continuing to entice you to make more purchases in the near-term.

No Such Thing As Free

Living in Singapore, you really should have guessed that there is never such a thing as free. There’s usually always a reason that certain products or services are being sold in a certain way.

Read Also: Why Being In Debt Is Not Always The Problem People Say It Is

On your part, you have to be prudent with your payments and only use interest-free instalments on products and services that you really require right now but cannot afford to pay for it at one go. These usually include essential furniture for your home. If it’s a luxury item, try to avoid such payment terms.

Missing any payments will mean being slapped with hefty fees and charges, so you’ll want to completely avoid that as the price of your product or service will only get more and more expensive with each new charge.

Exclusive September 2018 Promotion: Going One Better With Lucrative Sign-Up Perks

The credit card industry is a competitive one. That’s why we see so many pop-up booths at crowded MRT stations and at various high-traffic locations every day. The salespeople often tout interesting sign-up perks like luggage bags, cash credit and others.

Rather than being pushed a random credit card that may not suit our needs or give us the best rewards based on our spending habits and patterns, just to get the sign-up perks, we should opt to apply online for the actual credit cards that suit our needs.

This way, we get a credit card that maximises our rewards (based on our spending habits and patterns), as well as give us the type of rewards we prefer – cashback or miles. We can use credit card comparison sites like SingSaver to better understand which credit card gives us the best rewards based on our spending habits and patterns.

Additionally, we may receive more sign-up perks, on top of what they bank may be giving when we sign up this way!

So, there’s really no reason to avoid signing up for a credit card or doing so at a random pop-up booth we happen to come across next.

This Promotion – $200 In Takashimaya Or NTUC Vouchers And/Or $150 Cash

We’ve already applied for more than one credit card via a SingSaver credit card promotion in the past, and received several hundred dollars in vouchers and cash. We believe that everyone should take advantage of such promotions when we sign up for our credit cards.

From now till 30 September 2018, SingSaver’s promotion is offering up to $200 in Takashimaya or NTUC vouchers and/or $150 in cash when you apply for your credit cards. There’s really no reason not to get your credit card this way.

Here’ a step-by-step walkthrough (complete with screenshots) of the entire application process.

Here’s What You Need To Do (With Screenshots)

In order to avoid missing out any of the steps we need to take to receive our rewards, here’s a walkthrough of the entire sign-up process.

# 1 Decide Which Card(s) You Wish To Apply For

Depending on whether you are a new or existing customer of the bank, you may receive differing amounts of rewards. Here’s the list of credit cards available on this promotion (from now till 30 September 2018).


For new Citi customers only, you will receive $200 in NTUC Or Takashimaya Voucher from SingSaver. For existing customers, you will receive $50 in NTUC Voucher.

These are the eligible Citibank cards. You can click on the link below to sign up through SingSaver.

  1. Citi Cashback
  2. Citi PremierMiles
  3. Citi Reward
  4. Citi SMRT Card

Standard Chartered

For new customers only, you will receive $150 in cash from SingSaver. For existing Standard Chartered customers, you will receive $100 in cash.

These are the eligible Standard Chartered cards. You can click on the link below to sign up through SingSaver.

  1. Standard Chartered Unlimited Card
  2. Standard Chartered Spree Card
  3. Standard Chartered Reward +

American Express

For every successful American Express sign up, you will receive up to $150 in cash from SingSaver. This applies for both new and existing cardholders.

These are the eligible American Express cards. You can click on the link below to sign up through SingSaver.

  1. American Express Singapore Airline Krisflyer Card
  2. American Express True Cashback Card
  3. American Express Krisflyer Ascend Card
  4. American Express Capitacard($100 cash reward)

# 2 Apply For The Credit Card

We decided to apply for the American Express True Cashback Card for this example. This is because the writer is a cashback person and not a customer of American Express yet – hence he will get the $150 in cash.

After clicking on the link above, you will be taken to the SingSaver page to start your application process. Click on the orange tab labelled “Apply Now”.

This will take you to a page with all the American Express credit cards on offer for the promotion. Now, click the blue “Apply Now” button for the correct card that you want to apply for.

From here, you will be taken to the American Express sign up page. Here you need to tick the box to state that you have read the Eligibility Requirements, Annual Card Fees, Declaration & Authorisation and Product Highlight Sheet. This is quite straightforward, you just need to tick the box and click the green “Get Started” button below it.

# 3 Input Your Details

Again, this is a requirement for every new credit card application. You can choose to apply via MyInfo or Manually. We chose to do this manually.

We then have to fill in some basic information about ourselves. Each step of the way, our information is saved for us.

We continue filling up more information, there are a total of four pages we need to go through.

The last page is just a review page, we can look through the information we have inputted as well as review other options the bank is offering us. Lastly, click the “Submit” button.

Finally, we will arrive at a “Thank You” page. Remember to have a copy of this for reference – click the “Print This Page” button.

Note that this isn’t the end of your application. You still need to upload your financial documents to get your application approved.

# 4 Upload Financial Documents

You can either wait for an email from the credit card company or click on the link in the “Thank You” page to start uploading your financial documents.

This will take close to five minutes if you have the relevant documents ready.

There are mainly two things: 1) Proof of ID and 2) Proof of Income.

Proof of ID: This is just the front and back copies of our NRIC or passports.

Proof of Income: For most of us, this is our latest three months’ pay slips.

You’re done with the American Express’ application form, and should hear back from them in five to 10 working days to complete your application process.

After this, you have to go back to SingSaver’s page to complete their form. This is to receive additional your rewards from them.

# 5 Complete SingSaver’s Gift Redemption Form

Don’t forget this step if you want to collect the additional $150 in cash. Either click on this link to go to the form, or find it here:

Here’s what the form looks like. Complete it and hit the “Submit” button.

This promotion ends on 30 September 2018.

For any further questions or clarification, you can email Singsaver at [email protected]