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Are credit cards a boon or a bane?
This is a topic that occasionally draws divided views. On the one hand, some people believe that credit cards encourage people to splurge and may eventually lead to habitual overspending. On the other hand, there are others who believe that credit cards, when used responsibly, can serve as a convenient payment solution for consumers, and help us save money and make better financial decisions.
For most of us in Singapore, applying for our own credit cards usually begin after getting our first job and meeting the minimum income requirement, typically about $30,000 per annum. In fact, applying for a credit card is usually one of the first few financial decisions we make for ourselves as a young working adult.
In this article, we share four reasons why getting a credit card as early as possible makes financial sense.
#1 Enjoy the convenience of using credit cards for both offline and online purchases
In the digital world that we live in today, purchases that we make can take place both offline and online.
When we shop offline, paying by cash is still an option that is available in Singapore – though far from the most convenient. We not only have to make sure that we have enough cash to pay for our purchases, but also hold a variety of coins and notes of different denominations. Imagine the frustration of shop owners when they continuously meet customers who pay for a $1.30 drink using a $50 bill!
Alternatively, we can make things easier for all by paying with a credit card instead. This is not only faster, but also a contactless solution that would be preferred during the current COVID-19 pandemic. This is why more businesses, including hawkers and coffee shops, are also adopting cashless solution such as PayNow and PayLah as it improves operational efficiency and also minimise human contact.
If we are shopping online, paying by cash may not be an available option. Without a credit (or debit) card, it would be hard to execute most online transactions, including paying for our online subscriptions such as Netflix and Spotify. We may also miss out on online deals if we cannot pay because we don’t have a credit (or debit) card.
#2 Start enjoying cashback, air miles and other credit cards benefits
Whenever we choose to pay by credit cards, we are not only opting for convenience, but also likely to be making a better financial decision since most credit cards offer benefits, such as cashback and air miles.
For example, the DBS Live Fresh Card allows us to earn 5% cashback on online and Visa contactless spend*. In addition, we can also earn an extra 5% Green Cashback* when we spend at selected eco-friendly merchants. So, if we use public transport like most other people in Singapore, simply use the DBS Live Fresh Card to pay for our bus/train rides via SimplyGo (an eligible eco-transport service) and earn a total of up to 10% cashback.
This means that if we spend $100 a month on public transport via our DBS Live Fresh Card, we get a cashback of $10* for the month, which reduces our public transport cost to $90. We think this is pretty much a no-brainer for most of us who would frequently use public transport to get around.
* Valid with a minimum spend of S$600 for each calendar month. Cashback is capped at S$15 on eligible Sustainable Spend, S$20 on eligible Online Spend, S$20 on Eligible Visa Contactless Spend and S$20 on All Other Spend for each calendar month.
On top of that, those who prefer earning miles can also consider an air miles credit card such as the DBS Altitude Card. This is a card that earns us 1.2 miles for every S$1 local spend, 2 miles for every S$1 in overseas spend (in foreign currency) and 3 miles for every S$1 on online flights and hotel transactions (capped at S$5,000 a month).
Cards such as the POSB Everyday Card help us to earn attractive rebates on some of the everyday purchases that we may need to make. These include dining, groceries, online food delivery, online shopping, fuelling up on petrol, and recurring utilities and telco bills (a minimum spend of S$800 is required for bonus awarding in some categories).
#3 Track your expenses better in key spending areas
Credit cards are also an effective way to keep track of our monthly expenses.
One thing we like to do is to use various cards to track our spending in different categories. For example, we can use our DBS Live Fresh Card to pay for online and Visa contactless spend. Since the card lets us earn up to 5% cashback on online and Visa contactless spend, we can use this to keep track of how much we are spending online.
Drivers can use the POSB Everyday Card to enjoy attractive savings on fuel at SPC and discounts at Watsons. They can also earn a generous 10% cash rebates on online food delivery platforms like foodpanda, Deliveroo and WhyQ, and 5% cash rebates on major online stores like Amazon, Lazada and Shopee. By charging a certain category of spending to a specific card, we not only get to keep a closer tab on our spending but can also maximise the benefits that we can enjoy from each category.
Do note that there is a minimum spend to meet before qualifying for the various cashback offers so do consider if you can hit this minimum spend each month before you decide on a card. For example, the DBS Live Fresh Card has a minimum spend of S$600 for each calendar month.
At the same time, be mindful of sticking to your budget. For better control, it is prudent to streamline the due payment dates if you use more than one card. To avoid being late on credit card payments, set up alerts of calendar reminders or go for services such as automatic GIRO payments.
#4 Build your credit score early as a working adult
There is a perception that having credit cards means that we will appear less creditworthy to banks when we need to take a loan from them. This, fortunately, isn’t true. As a working adult, having no credit history might not necessarily work to our advantage. When disbursing a loan such as a home or a car loan, most financial institutions would prefer lending to a person with a good credit score, instead of a borrower with no credit history.
Obtaining our first credit card will be helpful in building up our credit history and maintaining our financial health, as your creditworthiness will be assessed based on past and current credit activities. Of course, we need to show that we are a responsible user of credit by ensuring that we pay in full and on time each month. Over time, this helps us to build a strong credit history and puts us in an advantageous position when applying for a loan we need in the future.
Suppose we choose not to use a credit card, based on the false assumption that it makes us appear as someone who does not need any credit facilities. In that case, we may be surprised to find out that this decision works against us when we need credit facilities in the future.
For a limited time only, get S$300 in cashback when you apply for any of the four DBS credit cards and make a minimum spend of S$300
Whether you are new to the credit card or are looking to replace the type of credit cards that you currently hold while adjusting to a work-from-home environment, it’s always ideal to apply for the cards you need when there are attractive sign-up perks.
From now till 16 August 2021, you can sign up for any of these four DBS credit cards and enjoy a cashback of S$300. Depending on the type of spending that you tend to make, you may find one or more of these cards suitable for you.
The four cards are:
1) To qualify for this S$300 cashback, apply online for any of these DBS/POSB cards from 3 August to 16 August with the promo ‘AUGFLASH’
2) Activate the Card within 30 days from Card Approval Date
3) Make a minimum spend of S$300 on the Card within 30 days from Card Approval Date
T&Cs apply. Find out more about this DBS August credit card flash deal here.
Regardless of which card you choose, the point here is that credit cards are useful not only as a convenient payment solution but also as a tool to help us track our expenses, save money, and to build up our credit score at the same time.
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