Wednesday, December 6, 2017

The Dangers of Credit Cards And How To Use It Smartly?

All of us know that credit cards can be dangerous if we overspend and end up not being able to pay the bills on time. The interest on credit cards is extraordinary high because it is an unsecured debt, different from home loans which are considered secured debt. Interest on credit cards are around 24% which is 2% a month if we could not pay the full sum. There are also advantages of credit card which we will explore in the later part of this post as well.

Dangers of Not Paying Your Credit Card bills in Full

There is always a minimum sum we have to pay on the credit card bill. It is always important to pay your credit card bills in full and NOT just the minimum sum. Paying just the minimum sum will incur the interest on your outstanding amount.

For example, if you have a credit card bill of $1000 and you just pay the minimum sum of $50, the interest will still be charged on the $1000 which is:

2% x $1000 = $20 (assuming 24% annual interest)

The minimum payment will be used to pay the interest charge first before reducing the outstanding balance. So, out of the minimum sum of $50, after deducting $20 to pay interest, there is $30 left to pay down the outstanding balance.

The outstanding balance is now = $1,000 - $30 = $970

Moneysense has a good illustration on how long it takes to pay off your bills if you just pay the minimum sum:
As we can see, even just $3000 outstanding credit card bills can take as long as 5 years to pay up if we just pay the minimum sum only. It is not advisable to delay any of your credit card bill payments as the interest is unbelievably high. If you do not even pay the minimum sum, your credit rating will be affected and it will affect your eligibility to get any other loans later. Legal action will also be taken against you if you continuously fail to pay the bills.

Advantages and benefits of credit cards - How To Use it smartly?

However, credit cards can also be beneficial for those who know how to use it to your advantage. I've heard and said a lot about the different cards out there (cash back, miles card, discounted items etc) which all helps us to be smarter in our spending. I also have some of the cards myself and it has given me lots of cashback and benefits.

In this post, I will specifically look at which card is the best for each of our life stages.

Before we get into the specific cards, I would like to offer a deal to all readers here. If at the end of this post you do not need any credit card or even if you applied for a card yourself, you can consider signing up as a referral and refer any friends whom you think will need any credit cards. You will get $25 choice of vouchers and your friend will also get extra $25 choice of his/her vouchers as well (choice of vouchers include NTUC fairprice, Grab, Lazada or Qoo10). Click here to be a referral.

Here are the cards for different life stages:


1) Fresh Graduate who just started working or adults who love cash back

For fresh graduates who just started earning a decent pay above $30,000 annually, a basic cash back card is a good one to start with. Both Standard Chartered and American Express provides good cash back cards with no minimum spend and no limit to the cash back you can get. Its a simple card with no strings attached. You just get cash back on everything you pay with your card including student loans or any other bills etc.

The cards to consider is the Standard Chartered Unlimited and the American Express True Cash back credit card. Both cards give 1.5% cash back on all spend without any minimum spend. For the AMEX card, they even give you 3% cashback on the first 6 months.

If you want to up your cash back even further, you can consider the Standard Chartered Spree card which was just launched recently. This gives you 2% cash back on all online and contactless transactions. Its what most young people will be doing nowadays.

Deals available for each card:
  • Standard Chartered Unlimited card is giving away $138 instant cash back which will be credited into your card upon approval
  • American Express True Cashback card application entitles you to $50 choice of vouchers (NTUC fairprice, Grab evouchers, Lazada or Qoo10)
  • Standard Chartered Spree card is giving away $138 instant cash back which will be credited into your card upon approval
  • In addition, if you are not referred by your friend through his or her referral code, you can use this code 1963671 to get extra $25 choice of vouchers
* Instant cash back is given and fulfilled by the bank subjected to terms and conditions. Please refer to the bank's page for more detailed information

Apply for any of the above cards here

2) Couples getting married or individuals and families who love to travel

For couples getting married, there is sure to be some big expenses for the photo shoot, the booking of the banquet and so on. These big expenses can be greatly taken advantage of using the right credit card. Apart from the above cash back cards, miles card are the best for couples getting married.

How attractive is the miles card for couples getting married? Do you believe you can get free tickets for your honeymoon to places like Europe, Maldives, New Zealand, Tokyo or even San Francisco or New York? Yes this is possible. It may be complicated but let me explain below:

The Citibank Premier Miles card has the best miles offer now. It is especially good for couples getting married as they give bonus miles upon $10,000 spending in the first 3 months. Paying for the wedding expenses easily goes above $10,000 in this case. For the Citi Premier miles card, they give 15,000 miles on your first spend (any amount) and additional 27,000 miles upon $10,000 spending in the first 3 months. This is already 42,000 miles which you get as a bonus. For wedding expenses especially the banquet, it can easily cost more than $40,000 for the banquet alone ($1200 per table x 35 tables=$42,000). As the Citi Premier miles card earns 1.2 Miles for every dollar spent, this is additional 50,400 miles earned.

Does the miles calculation sound confusing to you? Let me summarise below:


ItemCostMiles Earned
First spend (Any amount)$xx15,000 (bonus)
$10,000 spend within first 3 months$10,000 27,000 (bonus)
Wedding Banquet$42,000 50,400 (42000x1.2 miles)
Miscellaneous (photoshoot, wedding gown etc)$10,000 12,000 (10000x1.2 miles)
Total104,400

Just like that, we can get 104,400 miles. Where can 104,400 miles fly you to? I went to Citibank website and found the air tickets which we can exchange for to which destination:

For economy class, the miles can bring you to almost all countries across the globe. You can easily get free tickets for both you and your spouse on a honeymoon to Maldives or even New Zealand.




You can even fly for free in business class to some of the countries below.

The miles card doesn't just apply to couples getting married but also individuals and families who likes to travel. Share this with your friends who are getting married or who love travelling.

Deals available for each card:
  • Citi Premier Miles card entitles you to get $100 choice of your vouchers (NTUC fairprice, Grab evouchers, Lazada or Qoo10) on top of the up to 42,000 free miles given
  • In addition, if you are not referred by your friend through his or her referral code, you can use this code 1963671 to get extra $25 choice of vouchers
To sign up for any of the cards, click on the card names below:

Many more cards available with vouchers up for grabs here.
The voucher deal ends on 31st December 2017

How To Be A Referral And Earn $25 Vouchers for each friend you refer?

Not interested in any cards but want to earn vouchers? Be a referral and refer your friends to sign up. You and your friend can each get $25 choice of vouchers (NTUC fairprice, Grab evouchers, Lazada or Qoo10) for each successful sign up. Sign up to be a referral here.

After you get your referral code, simply refer them to my blog post for them to apply for the cards above or just send them this link to apply for any cards they need.



Get The Benefits, Pay Off Your Bills On Time - The Smarter Way To Spend

Nowadays, I seldom have much cash in my wallet. Wherever I go, as long as credit cards are accepted, I'll just use paywave to make the payment. Its easy to use and I get the benefits by spending smartly as well. I even pay all my credit card bills through my OCBC 360 account to get the higher interest.

However, always remember never pay just the minimum sum for your credit card bills. Make the payment in full and on time to avoid interest charges and late payment fees. This is the smarter way to spend.


PS: I have both the AMEX True cashback card and Standard Chartered Unlimited card for cash back. Will be looking at miles card soon to fulfill my travelling dreams

SG Young Investment is an affiliate partner of singsaver.com.sg so I get a referral fee for every sign up.

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1 comment:

  1. Appreciate this post. Will try it out.

    ReplyDelete