Just started working and ready to apply for your first credit card? Omg, there are so many banks and different types of cards.
Should you
Follow your family or friend’s recommendation or
Go for points, cashback or miles?
Watch Tiktok for advice?
Choosing your first credit card can make an impact on your financial life. There’s no magical solution but here are 5 steps to help you along if you just started a career in Singapore:
1. Consider why you need a credit card
Credit cards typically come with perks such as cash back or other rewards. But you can also easily fall into debt because of the difference between when you make a purchase and when you get charged.
All the transactions will be consolidated into a calendar/statement month bill which you would need to pay back this owed total amount. It’s so easy to tap then forget what and when you spent on food, transport, merchandise etc especially when work gets busy.
If you think you cannot manage, you can always stick to a debit card first because the transaction amounts are directly deducted from a linked savings account. Hence, you would require enough funds for transacting using debit cards.
2. Identify your spending habits
There are so many different types. Research the features, advantages and disadvantages of each type to determine which aligns best with your goals and spending habits.
Do you
Know roughly how much you might be spending on a monthly basis?
Track what you have been spending more on?
Prefer points, cashback or miles?
Your lifestyle choices should guide you towards the choice of credit card other than the incentives by different banks on welcome bonuses or sign-up rewards.
3. Understand card types and benefits
This is usually the fun part because most people want to huat. Credit card promotions can be attractive, but do note that there could be varying terms and conditions too.
A quick survey with different friends could give you an inkling that people usually try to maximise returns by stacking savings + salary bonus + spend bonus. Then choose the card with the bank that offers the types of rewards preferred.
Points
Different cards have collaborations with various merchants that will affect the points collected. You can usually earn points from every dollar spent, which can be accumulated then redeemed for vouchers or other stuff through the credit card's rewards portal. Check expiry dates!
Cashback
The amount depends on the card’s monthly minimum spend requirement and caps per category. Some difficulty usually encountered is the transactions with certain merchants that will be considered eligible spend and you need to spend effort tracking.
Miles
The miles games involve a whole lot of calculation and longer waits to clock enough and ‘fly for free’. It is usually per every S$1 spent on local or overseas spending. There are spending caps and currency conversion fees though.
Those driving frequently should consider those with fuel savings and some cards have compatibility with Apple Pay, Google Pay, and Samsung Pay.
4. Compare fees, interest rates and read the fine print
Look for credit cards with no annual fees or low annual fees, especially for your first card. Some banks are not waving off annual fees by the way. There’s eligibility criteria for different cards too like age and salary requirements.
Pay attention to late fees too as credit score will be affected. It will subsequently impact your application for fixed deposit or loans or other services because the banks use it as an indication whether you are likely to repay debts so be sure to pay on time.
If you plan to carry a balance, check the interest rates because these could be scary numbers of 20-30+% per annum.
Review the terms and conditions of the credit card agreement carefully. Pay attention to details such as grace periods, late payment fees, foreign transaction fees, and any restrictions or limitations on rewards.
For example, certain banks need your salary to be giro-ed, otherwise you will not get the bonus.
Research online reviews and ratings to gauge customer satisfaction. Also stay updated on the bank’s policies as they can change the terms and conditions of your credit card which impact the rewards.
5. Apply and manage your credit responsibly
Once you have selected a credit card that meets your needs, submit your application. Be mindful of applying for multiple credit cards within a short period, as this can impact your total spending needed for the spend bonus or cashback amount.
After you receive your credit card, use it responsibly by making timely payments, and avoiding unnecessary debt. Building a positive credit history early on will benefit you in the long run.
Auto giro can save you some hassle but making payment monthly can ensure that you login and monitor transactions, plus report weird ones (happened to some people recently) so that the bank can take action if applicable.
By reading these steps and taking the time to research and compare different credit card options, you may begin with a first credit card that aligns with your financial goals and sets you on the path to responsible credit management.
Cast Your Financial Spells Wisely,
Value Vaulter
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