Monday, January 17, 2011

Credit Card Frenzy

When I read reports that a Singaporean typically holds 6 to 7 cards as the number of credit cards in Singapore has crossed the 6 million marks, I'm like 'whoa!' though actually not quite surprising since we are after all, Singaporeans, who don't like to lose out to others in terms of the things we do. 

Basically if it's just 2 or 3 cards, then well, still okay as long as you can afford them when it comes to making your payment later. Then nowadays banks have tied up with different establishments so when their customers use the cards, they will stand to benefit from the cash rebates and privileges. But, 8, 9 and even 12?! That's like way too much. 

I've mentioned before that as long as you don't abuse the credit card, it is a useful tool to have and then if you often dine out, it's also good to get a card that offers discounts when you eat at different food establishments. Then petrol is another thing. With the rising costs of fuel, it's easy to pay quite a lot for petrol so making use of a credit card that offers discounts on petrol can also help you save some money.

But beyond that, getting credit cards just so that you can get discounts and cash rebates at certain shopping establishments are not necessary unless you frequent one or two of them quite a lot so it makes better sense. The best thing to do is to be aware of what you are spending on and prior to giving them your card to swipe, you must also ask yourself if you can afford to pay that amount later in full when the statements comes later.  

Also, ask yourself whether is it necessary to get certain cards just because they are on offer. Know how much annual fees you are paying for the card and whether you will eventually use the card so that you don't incur unnecessary annual fees. Then instead of looking at one side of the story where you are entitled to the cash rebates and discounts, do take note also that the tie-ins are also basically to make you spend and sometimes you may end up spending more than you should just so that you can enjoy such rebates. Multiple cards can lead to multiple debts and can cause a major drainage to your savings and you also need to think of yourself in a situation where you may end up losing your job or facing a life changing emergency that can also cause the drainage.

American financial gurus advice that credit cards are useful when you buy purchases online via safe websites and also for big purchases like a tv set so that when it comes to you defected, you can allow your banks to cancel the transaction until you get a proper one. I'm not sure how that works in Singapore but the same concept still applies in which if you know you will struggle through the payments later on, don't even think of passing that card over to swipe.

The one that I have, I just realized that it charges 28% of interest a year instead of the usual 24%. That's a heck lot! I normally have the credit card on standby to pay for my mobile bill and utilities bill coz at times, they don't want to wait till payday for the payment :S but when I get my pay shortly after, I pay them off.

Be more money savvy and not be easily swayed by the bank offers. You are ultimately responsible for the management of your own wealth. Think months or even years ahead in savings instead of just thinking about which credit card to obtain next. Be aware of other charges such as the minimum payment, the interest on roll over amount, penalty fees for late charges and annual interest fees. 

But if you make full payment, and not roll over the balance amount after the minimum payment, it will be interest free. To me, it's always best to use cash as a form of payment. I hardly even use NETS or Debit card which is actually cashless payment where they almost immediately deduct from your bank account, if you don't live in Singapore. I basically need to know how much I have spent, whether there is a need to spend less the next day and how much money I have left and how much of it to save. That is why cash is always the best option for me.

Don't blindly follow the crowd if you think that it's cool to get multiple credit cards. Let me tell ya the hard truth. There are not many people who are willing to lend you a helping hand especially when it comes to lending you the money if you fall into a debt trap because money is always a sensitive issue because everyone has their own budget to take care of. While you can ask the banks for help in terms of repayment, you still have to pay them back whether you have a job or not. Most jobs aren't stable because we are living in an ever changing working environment. Even if you have your own business and making profits, with stiff and strong competition, you can easily find yourself struggling if you don't manage to find creative ways to sustain your business.

See, so many things to think about instead of just taking up cards to fill up the space in your wallet. Credit cards, like money, shouldn't be treated lightly. So look at the cards you have right now and make the next difficult decision to cancel those that don't reflect your current lifestyle. Believe me, you will save more than the cash rebates and discounts given to you from using those cards.

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