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    Dos and Don’ts for Credit Cards

    A credit card is a useful tool for those looking to improve their purchasing power. Credit card issuers usually offer a plethora of benefits on their cards in an attempt to woo potential borrowers. Even though it is an integral part of modern wealth and expenditure management practices, it can come back to bite you if you fail to adopt adequate caution. If you love to live life by throwing caution to the wind, you may find a credit card to be a double-edged sword. With proper management, you may be able to save more money in the long run in addition to improving your creditworthiness. That means, you can significantly reduce your cost of borrowing money, especially if you’re looking to take a personal loan. However, if you can’t adhere to the “rules of the game”, you may end up finding yourself in a quagmire of debt.

    Do's of Credit Cards Singapore

    Do thorough research before choosing a card:

    Choosing the right card will ensure that you can maximise your returns and benefits. Going through a financial information collating site before applying for your credit card will help you understand more about a card that you want. You can not only compare similar cards offered by different financial institutions but also different types of cards. If you’re looking for a travel card, selecting a card that offers frequent flyer air miles makes more sense than selecting a card that offers heavy discount on grocery purchases. Also, see whether the card offers annual fee waiver, low interest and cash rewards.

    Keep a close watch on credit utilization:

    It is advisable that you clear out your credit card dues within the due date. However, if you’re simply paying the minimum balance and revolving the debt, make sure that the credit card utilisation doesn’t exceed 30% of the total limit. This will help you maintain a healthy credit score and make borrowings cost-effective.

    Set and stay within your monthly budget:

    It is very important that you stay within your set monthly budget. Having a credit card means you may be tempted to make purchases that you don’t really need. Having a good idea of your total savings and the ability to finance future spends will ensure that you don’t go overboard with your spending. Before making a purchase, think objectively whether you really need the item and whether you have enough money in your savings account to pay for the borrowing and the interest that you have to pay. Once you are sure that your bases are covered, you can go ahead and make the purchase.

    Inform your creditor of your inability to pay beforehand:

    Although, defaulting on your borrowings is never recommended, sometimes you may find it difficult to pay back on time. After all, to err is human! However, make sure that you inform your lender beforehand. Many lenders will offer you a grace period even after the due date. Informing them on time can ensure that you can get off without a heavy penalty or a significant damage to your credit score.

    Go through the terms and conditions on the lender’s website:

    Going through the fine prints of the agreement and the general terms and conditions of your lender will help you clear ambiguities and have better understanding of the rules of engagement. It helps you know more about the hidden costs, if any and provisos on the offers.

    Have a thorough understanding of your credit report:

    A good credit score gives you a better chance of qualifying for a loan. It will also help you get better deals compared to those with less than satisfactory credit scores. Go through your report to have a clear idea of your credit history and try to keep your debts in check.

    Fix an easy-to-remember due date:

    It is always advisable that you choose a due date that’s easy for you to remember. Add reminders so that you can pay off your debts before the due date and avoid penalties and additional interests.

    Clear your outstanding balance on time:

    If you continue to pay off your debt and clear your outstanding balance on time at the end of every month, you’ll be able to maintain a good credit score.

    Don'ts of Credit Cards Singapore

    Don’t miss out on your payments:

    With every successive timely payment on your credit balance, you can improve your credit score a little. However, one missed payment can affect your score tremendously. Therefore, you should never miss out on your credit card payments. Even if you can’t settle the dues in full, paying the minimum balance is recommended. If you need an extension, talk to your lender well in advance.

    Don’t take a cash advance:

    In case of an emergency, borrowing cash with your credit card may be the last resort. However, don’t make it a habit. Borrowing cash with your credit card means that your borrowing starts accruing interest from the first day, in the absence of a grace period. In most cases, you’ll end up paying additional interest even if you pay back the amount on time. Cash advances can adversely affect your credit score if you don’t repay your dues on time.

    Don’t own too many credit cards:

    Using multiple credit cards simultaneously not only makes tracking the credit balance and payments difficult, they can also lead to more payments through interest. It also means that you will probably have to pay more on annual fees. Consolidating your debt into one or two credit cards will offer you better value.

    Don’t cancel all your old credit cards:

    Along with timely payments, the length for which you use a card is considered by the CBS for your credit score calculation. Keeping one or two cards that don’t charge you too much annual fees can help you improve your creditworthiness.

    Don’t apply for multiple credit cards at the same time:

    One of the surest indications that you’re credit-hungry is to apply for multiple credit cards at the same time. At least, that’s how the CBS will interpret it. You’ll lose out on points which in turn will bring down your credit score because while judicious use of credit cards is recommended, being perpetually trapped in debt is not.

    Don’t go for the cheapest credit card:

    The cheapest credit card is not always the best! You’ll need to pick a card based on your specific needs. Also, cards that charge a premium annual fee offer a wide range of unmatched benefits. Do you due diligence while choosing your card. Following these guidelines will promote safe usage of a credit card. If you have stayed away from credit cards so far, you can put aside your fears and start using them. However, don’t forget to put on your life vest while taking a dive. Following the dos and don’ts assiduously will help you stay safe.

    Recommendation: how to avoid credit card debt

    Why Credit Cards Offer Better Value on Your Spends?

    With attractive cashbacks, redeemable loyalty reward points, and air miles on offer, a credit card can offer great value for money. If you don’t max out your cards and learn to use it judiciously, you can also save more in the long run. Unlike debit cards, the amount you spend on a purchase doesn’t get deducted immediately from your savings account allowing you to earn interest on that equivalent amount in your savings account.

    Why You Need to Be Careful With Your Credit Cards?

    While borrowing money for your expenditure may seem to be convenient, you need to bear in mind that you have to pay an interest on the borrowed money. Apart from repaying the full amount within the due date, it is also recommended that you shouldn’t use more than 30% of your credit limit. Paying the minimum amount every month or spending recklessly using your credit card means that you can get trapped under a pile of revolving debt.

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