Confessions of a Credit Card

Picking me up is as easy as picking up lunch at the cafeteria after work these days. You can get one when you pop downstairs to the commercial shopping areas if you are working in the Central Business District, by the bank at the corner of the heartlands if you are working there, or online on your iPhone if you are working in some forsakened part of Singapore.

With just a minimum of S$30,000 per annum requirement, fresh graduates often apply for a credit card, anxious to embark on their long awaited shopping spree, thinking that they benefit from enjoying the bargains from all the gourmet privileges. Some imagine themselves smart enough to pay up on time while enjoying all the privileges and rewards that come with me.

But few know that I'm the top ranking cause for bankruptcy among the age group 20 to 30. While I may be a convenient electronic tool, especially when traveling overseas, not everybody knows how to use me wisely and they often spin out of control. That is when I end up driving you to success… I am the reason you have to work hard... to pay off your debts!

So how did that happen, you ask? Well, simple. Here's some reasons why.

1. First, there's always the low minimum monthly payment trick

Patience is a virtue and I must say, its a virtue I possess. I am never in a hurry to see you pay off your debt. In fact, the longer you take to pay, the more I earn from you.

Now, paying about 1-3 per cent of what you owe every month or like some banks here, a minimum of S$50 a month, does not sound too bad. The problem, however, comes in when the balance is carried over to the next billing payment and the next and the next and it goes on and on… Alright and so, these carry-overs start incurring interest, mind you, not on a monthly basis but a DAILY basis. This also means, the longer you take to pay off the balance, the more you have to pay. And that depends on what the rate of interest of your credit cards charge. It's usually rather high considering they are charged daily and that's where reach deep into your pockets.

However, there are those fortunate ones who spend so little they have no balance to transfer. They escape the trap of the minimum monthly repayment but fret not.

2. Late fee is another lethal trick up my sleeve.

You see, students are students. Always late for lectures, late for club meetings, late in handing in assignments.. Habits die hard. What they do not know is that in the real working world, being late comes with a price. Literally. Unlike your kind lecturers, do not rely on credit card companies for grace periods. A flat rate of S$30 is usually charged when you are late in paying your minimum payment on top of an interest of about 24% per annum for your outstanding balance. This may be mountainous by the time you find out.

On the top of this (mountain of debt), interest is charged on a DAILY basis, once again not monthly or yearly, until you pay up. That is, if you can.

3. I have an eye for fine details.

There are terms and conditions to possessing me. Little fine prints where you eager fresh graduates fail to read but there they are for all to see.

For one, there are the little costs like foreign currency tendered to bank, interest on cash advance, overlimit fees, charges for overseas withdrawal, termination fee and so on. Also, the interest rate charged for cash withdrawals usually starts after the withdrawal instead of after the grace period as you usually get with your purchases.

For some cards, pay late by just one day and the zero per cent interest offer disintegrates and in place comes the hefty annual 24% interest rate. A big burden if you have an outstanding balance I would say. So I say, keep those specs on my friend.

4. I greet your greed.

Here, females are usually the ones who pay. They get us credit cards greedy to collect points and redeeming them for vouchers, coupons or other freebies. All this time thinking that they can have the cake and eat it, so long as they pay up on time.

But ever so often, they end up buying things they do not need, which is precisely why shops partner with us. Some even lost track of what they have spent on and exceed the credit limit.

5. What's worse...

Unbeknown to most, banks and financial institutions are allowed to view applicants' past bank transactions for the sole purpose of verifying credit worthiness. One wrong step and it will be harder, much much harder, for you to apply for loans in the future whether it is for your business or for personal reasons.

With so many temptations that come with me, there are not many who escaped paying the hefty price. However, many of those that survived and learnt their lessons choose to get a debit card instead. What spoilsports they are!


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