How do credit cards work in Singapore? We explain the answer here along with 10 tips from Singapore's richest investment bankers.
Wouldn’t it be great if there was some way to go shopping with next month’s paycheck before you get paid? Or better yet, if there was a way to get paid for spending money?
Well, keep your wishes for another day, because you can do all of this with a little thing we like to call a credit card.
Credit cards are the perfect opportunity to understand how money and loans work, and to begin using the financial system to your advantage. So if you’re asking yourself “how to do credits card work in Singapore”, then stick with us as we give you a complete breakdown of this fabulous life-changing tool!
1. What Is a Credit Card?
Before we start selling you the amazing perks of credit cards, we should establish what it is first.
Aside from being a slice of well-manicured plastic with holographic coloring and a fancy bank logo, a credit card is a way of borrowing funds. Instead of paying out of pocket with a debit card or cash, you’ll pay with money loaned from a bank or financial institution (FI).
There are limits to this, of course.
When you apply for a credit card, the bank or FI will approve you for a certain amount. Let’s say you were given a S$5000 limit, then you could only ever borrow up to S$5000. Then, each month you’ll make payments on the money you borrowed.
2. Using a Credit Card in Singapore
You’ve applied, got the card, know your limit, so now it’s time for some fun!
After you activate your card with the included instructions from your bank, then you’re ready to start spending. Spend on what, you might ask? Well, everything.
- Online Shopping
This is when credit cards can get really useful if you want them to. The best credit cards in Singapore will offer perks for using their credit cards. For instance, you’ll get travel miles or cashback incentives when you use your credit card. They’ll even offer extra points or miles when you use your card on specific items like gas or groceries.
Credit card incentives let you use the financial system to your benefit because you get rewards for buying things you would’ve bought anyway.
3. How Do Credit Cards Work In Singapore?
Credit cards are starting to sounds pretty useful, but how do they work?
It all begins with finding an unbeatable bargain or finally splurging on a high-priced item you’ve been eyeing for ages. After arriving at the checkout counter and schmoozing the cashier (or the online chatbot, we won’t judge), you’ll use the card like any other payment method.
However, there are protective measures in place to ensure the card is used correctly.
If you’ve already reached your credit limit, or have missed payments, then your card will be declined upon purchase. While credit cards offer amazing benefits, it’s still a loan between you and a bank, and failing to uphold your end of the bargain can result in serious consequences.
As long as you keep up with your monthly payments and avoid maxing out your card, then you have nothing to worry about. The important thing to remember is this all has to be paid back.
People may think using credit cards is about spending money you don’t have, but in reality, it’s about spending money you do have in a way that gets you cheeky trips to Europe or extra money in the bank.
4. Top Credit Card Tips!
Now that you understand the basics of credit cards, we want to give you some extra tips to help you prepare for a future with credit. Having credit is essential to a lot of life chapters. Buying a car, getting a mortgage, and many other things come down to your relationship with credit.
Here are the more abstract aspects of owning a credit card you should pay attention to.
Much like you create a digital footprint, you create a credit footprint as well. And this footprint will follow you forever like a bad tweet.
Your credit history is determined by your ability to pay back your credit card. So, how often you make payments and the size of your payments will affect your credit history.
All of this will be recorded in your credit report. Your credit report details how many credit accounts you have, what types of accounts they are, and how much is owed on them. It covers much more, but the key takeaway is it contains your entire credit history, the good, the bad, the ugly, and it can affect your ability to receive credit in the future.
While your credit history and report contain the facts, your credit score is a measure of your creditworthiness.
Lenders and financial institutions will analyze your credit history, report, and current standing, and give you a number out of 300 to 850, showing your creditworthiness, 850 being the best.
Banks will use this score to decide if it’s safe to extend or if they should deny your credit. Think of car payments, mortgages, or rent, situations where banks have to trust you’ll keep up with payments.
If you haven’t noticed by now, paying back your credit card is incredibly important. But again, as long as you make payments on time and keep your credit under control, there’s no need to worry or stress. Credit scores and reports are there to prevent people from taking advantage of the system by stealing money.
5. Understanding Credit Cards in Singapore
Credit cards are a smart and savvy way to start building your life in the eyes of financial institutions. While life is about appreciating the rainbows and butterflies, it’s also about playing a role in this world, and money is a huge part of that.
Stay ahead of the curve by exploring ways to secure yourself financially so you can appreciate more later.
You came here asking “how do credit cards work in Singapore” but left here knowing so much more. If you’re ready to keep this train moving and want to learn more, then check out our money management blog!