Should you own a credit card in Singapore?

Applying for a credit card is a huge milestone. It is a significant moment that marks your transition to working life. If you are a first-time card seeker, be prepared to adjust your lifestyle.

With a mound of responsibilities that come with owning a credit card, you might be doubtful if you should apply for one, but fret not - you will be glad to know that owning a credit card comes with many benefits.

We have compiled a list of the five key benefits of getting a credit card.

5  key benefits of owning a credit card in Singapore

1. Credit cards help build credit history for loan applications 

You must be wondering, what do credit cards have to do with loan applications? Credit cards help boost your credit score by building your credit history.

It is imperative that you have a good credit history. Why is it so?

Before a bank decides to issue a loan to you, they will assess your creditworthiness. With a good credit history, you are more likely to get approval on your loan application.

Additionally, you would probably get favourable interest rates too. If you want to buy a house and need a mortgage loan from the bank, a low-interest rate will work in your favour.

How do you ensure that you have a reliable credit history?

Firstly, settle your credit card bills promptly and in full. Secondly, do your best to stay below your credit limit.

Doing so reflects your credibility and financial soundness. It is telling of your creditworthiness and ability to repay debts.

2. Gives you more access to money 

In Singapore, your credit limit depends on your annual income. Your credit limit is capped between two to four times your monthly income. For example, if you earn $5,000 a month, you can spend between $10,000 to $20,000 in a month.

Even if you do not have money in your bank, you will still have access to funds. In emergencies, this benefit of a credit card comes in handy.

For example, big-ticket household items like washing machines might suddenly break down. With a credit card, you can still replace your washing machine without having to cough up a large sum of money immediately.

However, we recommend you spend within your limit and only borrow an amount you can afford, as credit card interest rates are very high. On average, credit cards have a 25 per cent interest rate in Singapore.

READ ALSO: Your guide to credit card applications in Singapore

3. Simple  way to keep track of your spending 

Find it difficult to keep track of your monthly expenses? Making payments with a credit card is an excellent way to track your spending, as you will get a detailed breakdown of your expenses on your credit card statement.

You can also better understand your spending habits and monitor trends. Moreover, you can also use your credit card statement to track unauthorized purchases or dispute any transactions, which is an added safety feature.

4. Get credit card sign up promotions and bonuses

Still on the fence if you should apply for a credit card? You will be happy to know that many banks offer credit card sign-up promotions and bonuses. Incentives usually come in the form of free cash or expensive gifts.

Typically, these credit card sign-up promotions come with a catch. For example, most offers require you to spend a sum of money within a stipulated time frame.

You will only be rewarded with the credit card sign-up promotion when you have met the criteria. You also need to pay your bills on time and in full to avoid penalties on your spending.

Based on our analysis, three credit cards for your consideration are - Standard Chartered Unlimited Cashback Card, Citi Cash Back Card, and Maybank Horizon Visa Signature Card. These three credit cards offer some of the best sign-up promotions and bonuses.

Best sign-up credit cards promotions 2022

1. Standard Chartered Unlimited Cashback Card

• 1.5 per cent unlimited cashback w/ no min. spend requirement
• Promotions: Enjoy a six-month Disney+ subscription for new SCB members when you activate your card within 30 days of card approval. Promotion valid until Mach 31, 2022
• Existing cardmembers receive a three-month Disney+ subscription

2. Citi Cash Back Card

• Up to eight per cent rebate on groceries & petrol, six per cent on dining
• Promotions: Receive Nintendo Switch (worth $499) or Samsung Galaxy A8 (worth $448) or $350 cash via PayNow upon activating and spending min. $500 spend within 30 days of card approval. Valid until March 14, 2022.
• Existing cardmembers will receive $30 cash via PayNow with no minimum spend

3. Maybank Horizon Visa Signature

• Apply Now Foreigners Apply Now Foreigners
• Market-leading 3.2 miles/$1 local dining & transport spend
• Promotions: Get Garmin vivomove Style worth $469 spend $300 for each of the two consecutive months upon approval (Limited to the first 2,000 approved applicants)

READ ALSO: Are annual fee credit cards in Singapore worth it?

5. You can get attractive credit card promos and rewards

How does saving money as you spend sound? A huge benefit of credit cards is the promos and rewards that come with them.

Wonder what type of rewards and promotions you can get from credit cards? Examples include cashback, dining perks, and frequent flyer miles.

Best credit card for cashback: UOB One Credit Card

Wonder how cashback works? Every time you charge a payment to your credit card, you will earn a portion of your spending back in the form of cashback. For most credit cards, the cashback is credited to your statement, which would reduce your credit card bill.

If not, cashback is sent directly to your bank account. Moreover, there are two types of cashback rates. They are flat cashback rates and cashback rates that change according to your monthly spending. One of the best credit cards for cashback is the UOB One credit card.

The UOB One Card is one of the most generous cashback cards, with a flat cashback rate of five per cent, and an additional five per cent on select merchants (Dairy Farm, Shopee, Grab and more). 

Best credit card for dining rewards: OCBC 365 Card

If you are a foodie, you will be glad to know that many credit cards offer dining rewards. For example, some establishments offer special discounts if you pay with a certain bank's credit card. A credit card with one of the best dining rewards is the OCBC 365 credit card.

OCBC 365 Card offers great rebates on dining (six per cent), petrol (five per cent), groceries (three per cent) and many more. Given that it also doesn't have an annual fee, its rewards rates are some of the best on the market.

Best credit card for travel miles: American Express Singapore Airlines Krisflyer Card

The announcement of the new Vaccinated-Travel-Lanes (VTL) is an indication that travel is resuming. If you want to earn rewards during your trips, you should use mile cards for your travel-related spending.

You can also save money on your travel expenses. For example, you can use your accumulated miles for free hotel stays. Additionally, free limousine transfers and access to airport lounges are also exclusive perks that come with travel miles credit cards.

American Express Singapore Airlines KrisFlyer Card high rewards on Grab transactions (three miles/$1) and two miles/$1 on foreign currency spend, making it a great travel credit card.

General criteria for credit card application in Singapore

How do you apply for a credit card in Singapore?

In Singapore, most banks require Singapore citizens and permanent residents below 35 years old to have a minimum annual income of $18,000 and those between the ages of 35 and 55 must have a minimum annual income of $30,000.

On the other hand, foreigners are required to have a minimum annual income between $40,000 and $80,000, which is dependent on the bank.

The bottom line

Have you changed your mind on whether to apply for a credit card?

Not only are credit cards great for your financial well-being, but they also help you earn money through credit card promotions. However, you should use credit cards responsibly to avoid unnecessary debt.

With the advancement of technology, application for a credit card is quick and easy. You can simply apply for a credit card online.

Applications are usually processed within minutes, giving you your approval almost immediately.

Ultimately, deciding whether to apply for a credit card depends on your financial ability to repay charges.

This article was first published in ValueChampion.