Credit cards come with a host of features and benefits, a good reason why credit cards are such a popular phenomenon. If you’re looking to apply for a credit card any time soon, here are 10 things you definitely need to know. These points will give you a better understanding of how credit cards work and what you can expect from them.

Annual fees on credit cards

All credit cards offered by banks (at least a significant percentage of them) come with an annual fee. The annual fee varies mainly from one card to another, even in the case of cards offered by the same bank. Premier cards that offer better benefits than regular cards usually have a higher annual fee.

While the primary card almost certainly comes with an annual fee, add-on cards also come with an annual fee in most cases. Sometimes the annual supplement card fee is waived for the first year or so; this is to keep the card more competitive and in demand. Certain banks also waive the annual fee for the main card, for the first year, the first two years or more.

Annual interest rate

All transactions you make with your credit card attract a certain rate of interest known as the Annual Percentage Rate (APR). The interest rate depends on the bank that offers the card and the type of card. The interest rate for most credit cards in Singapore is between 23% per annum and 30% per annum.

Banks allow an interest-free period of approximately 21 days from statement posting (again, this depends on the bank and card type) and do not charge interest if the amount is paid in full within this window without interests. . If the amount is not paid before the end of the interest-free period, the applicable interest charges will apply.

Cash advance fees

Credit cards allow customers to make emergency cash withdrawals from ATMs. These cash advances carry a handling fee of about 5-6% of the amount withdrawn, plus interest charges ranging from 23-28% per year. Interest on cash advances is calculated daily at a compounded rate until the amount is repaid in full. Cash advances are often a risky phenomenon, especially considering the high interest charges. Therefore, if you withdraw money with your credit card, it is recommended that you refund the full amount as soon as possible.

minimum monthly payments

As a credit card customer, you must pay a minimum amount each month, or the full amount if possible, which is 3% of the total monthly outstanding balance. Minimum payments must be made before the payment due date if late fees are to be avoided. The minimum payment on your monthly credit card statement may also include previous months’ outstanding minimum payments, late fees, cash advance fees, and overlimit fees, if applicable.

Late Payment Fees

If the minimum amount is not paid before the payment due date, banks impose a certain fee, commonly known as a late payment fee. The late payment fee for credit cards in Singapore can range from S$40 to S$80, depending on the bank offering the card.

Overlimit Fees

Overlimit fees are still applicable and are charged by the bank if the assigned credit limit is exceeded. Overlimit fees can range from S$40 to S$60 for credit cards in Singapore.

Cashback and reward points

One aspect that makes credit cards quite an exciting phenomenon is the reward points/cash back that can be earned on purchases. Different cards are structured differently and allow you to earn cash back or reward points, or both, on your purchases. Some cards allow you to earn reward points on groceries, while others allow you to earn cashback or reward points on airline ticket reservations, retail purchases, etc. Cash back and reward points are features that are specific to certain credit cards and the extent of the benefits depends on the type of card and the bank that offers the particular card. Reward Points earned on purchases can be converted into exciting coupons, discounts and enticing shop/retail/online deals from the card’s rewards catalog.

balance transfers

Certain credit cards allow you to transfer your entire credit card balance to that particular credit card account, allowing you to consolidate your debt. Balance transfer credit cards have an interest-free period of 6 months to 1 year, depending on the card you applied for. For balance transfer cards, banks charge a processing fee and may also charge interest (unlikely in most cases). After the interest-free period (6 months – 1 year depending on the card), normal interest charges apply on the card for transactions and cash advances.

Air miles programs in Singapore

Certain credit cards (mostly premium credit cards) offered by some banks in Singapore allow you to earn airline miles by converting your earned reward points into card purchases. Airline miles cards typically come with a higher annual fee due to their premium nature. As a premium credit card customer, you can accumulate enough airline mileage points to fully offset your next vacation.

credit scores

In short, your credit score is a projection of how well you have managed your debt in the past. It takes your payment patterns into account and records instances of late payments, excessive credit limits, loan defaults, regular/timely payment history, etc., and gives banks an idea of ​​how good you can be at handling of debt in the future. A good credit score is vital for loan applications and credit card applications to be approved.

The points mentioned above will be helpful if you are considering applying for a credit card. These aspects will give you a full understanding of how credit cards work in Singapore, giving you a better idea of ​​what to expect. These will also work if you are not happy with your current card and are also looking to switch to another credit card.