Credit Cards
The Recent Straits Times Report on the Platinium War [May 28th 2005] raised my awareness of the Credit Consumerism in Singapore.
According to official statistics, there are 3.9 million credit cards issued in Singapore. Although on the average 1 out of 5 Singaporeans clear their credit cards payments in full by the end of each month it is the highest contributing factor of bankruptcy in Singapore with the last number totalling 21,877 according to Official Assignee [OA] figures.
From a different perspective, this means 4 out of 5 Singaporeans do not clear their credit payments on time. So far only one case scenario has been highlighted by The Straits Times in providing possible reasons why these people have defaulted on their credit payments.
According to Mr Leong Sze Hian, a financial planner, some possible reasons could be "..when there is some financial problem and an individual attempts to max out his cards... like drugs.. very hard to stop."
Therefore, as a responsible credit card user, you should understand the terms used by your issuing bank. Among those you're likely to find are the following:
Miscellaneous Fees
Some card issuers require an annual fee - the amount you must pay to get a card or to renew it every year. Some banks also charge fees for submitting an application, for being late with a payment, for taking out a cash advance, for exceeding your credit limit, or for maintaining a zero balance. Read your statement carefully so that you know all of the terms and conditions.
Grace Period
This is the number of days the bank allows you to borrow their money interest-free. Grace periods vary, usually from two weeks to 25 days, depending on the bank that issues the credit card. This period is usually applied to new purchases, but only if there is no old balance being carried forward. After the grace period expires, if you haven't paid your balances in full, interest can be accrued from the date of purchase.
Some cards do not offer interest-free grace periods, and you start incurring interest from the date of any purchase.
Cash Advances
The issuing bank or financial institutions treats cash advances like loans, not like purchases or merchandise. When you take a cash advance, interest begins to accrue differently - sometimes without a grace period and at a higher rate. Check with your card-issuer for cash advance fees and interests.
Interest Calculation
When you use your credit card, the issuing bank or financial institution is really giving you a loan for the amount of your purchases. The bank charges a fee - called interest - for using its money. The credit card company pays the travel agent or the furniture store within a few days of the transaction, and you must begin repaying the loan when your monthly statement arrives in the mail.
All interest charges can usually be avoided by paying the balance in full within the time limit specified on your statement. Check the fine print though, because some banks charge a fee for maintaining a "$0 balance" or don't have a "grace period".
If you choose not to pay all you've borrowed from the bank - banks call that "revolving the balance" - interest will be charged. Obviously, the quicker the balance is paid in full, the less interest is paid. Be sure to learn about the terms and policies of your credit card. Interest rates will vary by card, some may begin charging immediately without any "grace period". Some start charging interest from the date of transaction or the date when the transaction is processed in the system. Others may start charging interest from the date on your statement.
Banks use various methods to calculate interest, and it's up to you to learn how your bank computes these charges. Unlike a house mortgage or a car loan, credit card interest can be charged by the day or by the month.
If you do not pay the balance in full, interest on the unpaid amount, or revolving balance, will be added to the total amount owed. When this happens, you are paying interest on interest, also called compound interest. Any new purchases you make can be included in the total balance immediately and will begin to accrue interest from the date of purchase. If you have a large balance, paying only the minimum amount each month can be an expensive way to use your credit card.
Try to anticipate your credit needs. A few months before the holidays or before you head off on that dream vacation, start paying down your balance by sending in more than the minimum payment. When you begin charging holiday gifts or charging for your vacation, you won't be piling new bills on top of old ones, and there will be less chance of exceeding your credit limit.
Be sure to know what your APR (annual percentage rate or interest rate) is, and always include the cost of credit in your budgeting or money management.
So my friends, this is a little knowledge I can share with you. "Know yourself" should be the motto of anyone shopping for a credit card. A bit of research and a good deal of self-analysis of your credit needs and bill-paying habits should lead you to the right card. Regardless of which card you choose, use your card wisely, and repay your debts on time.
Me? I'm choosing to stick to my Debit Card.
According to official statistics, there are 3.9 million credit cards issued in Singapore. Although on the average 1 out of 5 Singaporeans clear their credit cards payments in full by the end of each month it is the highest contributing factor of bankruptcy in Singapore with the last number totalling 21,877 according to Official Assignee [OA] figures.
From a different perspective, this means 4 out of 5 Singaporeans do not clear their credit payments on time. So far only one case scenario has been highlighted by The Straits Times in providing possible reasons why these people have defaulted on their credit payments.
According to Mr Leong Sze Hian, a financial planner, some possible reasons could be "..when there is some financial problem and an individual attempts to max out his cards... like drugs.. very hard to stop."
Therefore, as a responsible credit card user, you should understand the terms used by your issuing bank. Among those you're likely to find are the following:
Miscellaneous Fees
Some card issuers require an annual fee - the amount you must pay to get a card or to renew it every year. Some banks also charge fees for submitting an application, for being late with a payment, for taking out a cash advance, for exceeding your credit limit, or for maintaining a zero balance. Read your statement carefully so that you know all of the terms and conditions.
Grace Period
This is the number of days the bank allows you to borrow their money interest-free. Grace periods vary, usually from two weeks to 25 days, depending on the bank that issues the credit card. This period is usually applied to new purchases, but only if there is no old balance being carried forward. After the grace period expires, if you haven't paid your balances in full, interest can be accrued from the date of purchase.
Some cards do not offer interest-free grace periods, and you start incurring interest from the date of any purchase.
Cash Advances
The issuing bank or financial institutions treats cash advances like loans, not like purchases or merchandise. When you take a cash advance, interest begins to accrue differently - sometimes without a grace period and at a higher rate. Check with your card-issuer for cash advance fees and interests.
Interest Calculation
When you use your credit card, the issuing bank or financial institution is really giving you a loan for the amount of your purchases. The bank charges a fee - called interest - for using its money. The credit card company pays the travel agent or the furniture store within a few days of the transaction, and you must begin repaying the loan when your monthly statement arrives in the mail.
All interest charges can usually be avoided by paying the balance in full within the time limit specified on your statement. Check the fine print though, because some banks charge a fee for maintaining a "$0 balance" or don't have a "grace period".
If you choose not to pay all you've borrowed from the bank - banks call that "revolving the balance" - interest will be charged. Obviously, the quicker the balance is paid in full, the less interest is paid. Be sure to learn about the terms and policies of your credit card. Interest rates will vary by card, some may begin charging immediately without any "grace period". Some start charging interest from the date of transaction or the date when the transaction is processed in the system. Others may start charging interest from the date on your statement.
Banks use various methods to calculate interest, and it's up to you to learn how your bank computes these charges. Unlike a house mortgage or a car loan, credit card interest can be charged by the day or by the month.
If you do not pay the balance in full, interest on the unpaid amount, or revolving balance, will be added to the total amount owed. When this happens, you are paying interest on interest, also called compound interest. Any new purchases you make can be included in the total balance immediately and will begin to accrue interest from the date of purchase. If you have a large balance, paying only the minimum amount each month can be an expensive way to use your credit card.
Try to anticipate your credit needs. A few months before the holidays or before you head off on that dream vacation, start paying down your balance by sending in more than the minimum payment. When you begin charging holiday gifts or charging for your vacation, you won't be piling new bills on top of old ones, and there will be less chance of exceeding your credit limit.
Be sure to know what your APR (annual percentage rate or interest rate) is, and always include the cost of credit in your budgeting or money management.
So my friends, this is a little knowledge I can share with you. "Know yourself" should be the motto of anyone shopping for a credit card. A bit of research and a good deal of self-analysis of your credit needs and bill-paying habits should lead you to the right card. Regardless of which card you choose, use your card wisely, and repay your debts on time.
Me? I'm choosing to stick to my Debit Card.
posted by Inarticulate at 10:42 AM
2 Comments:
Ho ho... Speaking of credit cards. I've been working at Amex for a month or so now and there are just soooo many people with bad financial planning! They totally screw up their account then blame it on everyone else. I think that's the problem with alot of people. They overlook things, they don't ask, don't listen... Or worse, ask and then not listen. (arghhh!!!!)
There're so many ways to avoid annual fees, late payment charges, interest charges... Since i've started work there, i've become more pro-credit card. =P
It's true. Most pple spend beyond their means, and it's precisely the credit card which gives them that feeling ....
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