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60 Second Guide to Credit Cards

credit card What is a Credit Card?

A credit card is used to get small, unsecured loans from the issuing bank. Unlike a debit card, a credit card does not require you to have the money in your bank account.

Credit cards often give discounts and bonuses for certain purchases. For example, one card might give a 10% discount when used at specific stores; another might give you a 5% cash rebate on petrol.

0:60: Understand the Fees

There are three kinds of fees for credit cards. These are annual fees, late fees, and the interest levied by outstanding debt.

The annual fee (usually around $130) is payment for being able to use the card. Most banks waive annual fees for the first year.

Late fees are incurred when you don’t repay the minimum sum on time. Most credit cards require that you repay at least $50 a month; failure to do so will incur late fees ranging from $50-$60.

0:50: Right Card for the Right Purchase

Before swiping the card, check if it’s the best one to use.

The merchant in question will be able to tell you which credit cards give you discounts or freebies. If you can’t be bothered messing with different cards, get a cashback card: This often gives you a rebate of 0.5% – 5% off your monthly spending, wherever or whatever you buy.

You can also check sites like SmartCredit.sg to find cards that are best suited to your favourite restaurants, shops, etc.

0:40: Know the Billing Cycle

Make sure you note the billing cycle of each credit card.

This is the exact day by which repayment needs to be made. Miss it by even one day, and you could incur late fees and interest (discussed above).

So go on and write them all down in your planner. Set an alarm on your phone if you have to.

0:20: Pay the Debt in Full

Always pay the credit card debt in full. If you have outstanding debt (also called rollover debt), the bank will levy interest of around 2% per month (often stated as interest per annum).

You can pay credit card bills at AXS stations, through ATMs, or online.

0:10: Redeem the Points

As you charge more to your credit card, you will accumulate reward points. Check on the bank’s website, to see what freebies you can trade the points for.

Most of the time, these are things like movie tickets, discount vouchers, bonus miles, etc.

Some credit cards have reward points that expire, so be sure to redeem them on time.

This article was contributed by MoneySmart.sg. MoneySmart.sg helps you make better financial decisions. Follow MoneySmart.sg on Facebook for more Personal Finance Tips and Tricks

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.