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Hunting for a New Credit Card? Here Are 10 Things You Should Definitely Know

Credit cards provide a variety of features and perks, which is one of the reasons they are so popular. If you're thinking about applying for a credit card in the near future, here are ten things you should know. These considerations will help you understand how credit cards function and what you can anticipate from them.

Annual fees on credit cards

An annual fee is charged on all credit cards provided by banks (at least a large percentage of them). The annual cost varies a lot from one card to the next, even among cards from the same bank. Premier cards, which provide more advantages than regular cards, usually have a higher annual cost.

While the primary card nearly always has an annual charge, supplemental cards almost always have an annual fee as well. The yearly cost for the supplemental card is sometimes waived for the first year or two, in order to keep the card competitive and in demand. Certain banks also waive the yearly charge on the primary card for the first year, or for the first two years, or for a longer period of time.

Annual rate of interest

Every transaction you make with your credit card incurs an interest rate known as the annual percentage rate of interest (APR) (APR). The interest rate is determined by the bank that issues the card as well as the card's kind. The interest rate on most credit cards is from 23 percent to 30 percent each year.

Banks provide for an interest-free period of roughly 21 days from the date of the statement's publication (again, this varies by bank and card type) during which no interest is charged if the balance is returned in full. If the balance is not paid before the end of the interest-free term, interest charges will be applied.

Cash advance charges

Customers can use their credit cards to withdraw cash from ATMs in an emergency. These cash advances come with a processing fee of around 5% to 6% of the withdrawn amount, as well as interest rates ranging from 23 percent to 28 percent per annum. The interest on cash advances is calculated daily at a compounding rate until the entire amount is returned. Cash advances are often a hazardous proposition, owing to the high interest rates. So, if you use your credit card to withdraw money, it's best to pay it back in full as soon as possible.

Minimum monthly payments

As a credit card user, you must pay a minimum of 3% of the total monthly outstanding debt each month - or the full amount if feasible. If late payment fees are to be avoided, the minimum payment must be made by the payment due date. In addition to outstanding minimum payments from previous months, late payment charges, cash advance charges, and overlimit fees, if applicable, the minimum payment on your credit card monthly statement can include late payment costs, cash advance charges, and overlimit fees.

Late payment charges

Banks impose a fee if the minimum amount is not paid by the payment due date, which is usually referred to as the late payment fee. The late payment charge for credit cards can be anywhere from S$40 to S$80, depending on the bank that issued the card.

Overlimit fees

If the assigned credit limit is exceeded, the bank will charge overlimit costs. For credit cards, overlimit penalties can vary from S$40 to S$60.

Cashbacks and reward points

The reward points/cashbacks that may be earned on purchases are one of the aspects that make credit cards such an interesting phenomena. Different credit cards have different structures that allow you to earn cashback, reward points, or both on your purchases. Some cards provide cashback or reward points on grocery purchases, while others offer cashback or reward points on airline ticket bookings, retail transactions, and so on.

Cashbacks and reward points are features that are exclusive to certain credit cards, and the degree of the advantages varies depending on the type of card and the bank that offers it. The card's rewards catalogue contains interesting vouchers, discounts, and appealing shopping/retail purchase/online offers that may be turned into reward points earned on transactions.

Balance transfers

Certain credit cards allow you to consolidate your debt by transferring your whole credit card amount to that credit card account. Balance transfer credit cards provide a 6-month to 1-year interest-free period, depending on the card you apply for. Banks charge a processing fee and may also charge interest when using balance transfer cards (unlikely in a majority of cases). After the interest-free period (6 months - 1 year, depending on the card), standard interest rates apply to transactions and cash advances on the card.

Air miles programmes

Some banks' credit cards (mainly premium credit cards) allow you to earn air miles by converting reward points earned on transactions made with the card. Due to the premium nature of air miles cards, they usually have a higher annual charge. You may earn enough air mile points as a client of a premium credit card to entirely offset your next vacation!

Credit scores

In a nutshell, your credit score reflects how effectively you've handled debt in the past. It considers your payment history, including instances of late payments, credit overlimits, loan defaults, and a history of regular/timely payments, among other factors, to provide banks a sense of your ability to manage debt in the future. A strong credit score is necessary for loan and credit card applications to be accepted.

If you're thinking of applying for a credit card, the information above will come in useful. These features will provide you with a thorough grasp of how credit cards function, as well as a clearer sense of what to expect. These will also work if you are unhappy with your existing credit card and want to switch to a different one.