So you’re ready for your first credit card. It may be an overwhelming undertaking for anyone new to the world of credit. A credit card implies that you are responsibly handling your finances and you want to start building your credit. Unfortunately, you won’t be able to start with just any credit. This article will discuss our recommended list of starter credit cards for beginners and a few tips to help ease your transition into the world of credit.
A few things to consider:
Type of Rewards
Different credit cards offer different types of compensations that reward you for charging. There are cash back credit cards, rewards credit cards, and air miles credit cards. Furthermore, within each type of card, certain categories give you higher reward rates, such as dining, shopping, and traveling.
As a general rule of thumb, you always want to pay your statement balance in full and on time. This will build your credit rating and avoid any penalties that come with paying late or missing a payment. However, all credit cards have an interest rate attached to them. They only charge this interest rate on the outstanding balance if you miss your payment. If you cannot pay the full bill in any given month, you would want to choose the credit card with the most affordable rate.
The annual fee is a surcharge that is charged once a year to use that certain credit card. Not all credit cards have an annual fee. At times, the fee is $0 or the fee can be waived. The annual fee covers the administrative costs of maintaining your credit card account. For example, if you ever need to replace your card if it’s lost, stolen, or damaged, you will be able to get a new one immediately.
Furthermore, credit cards with annual fees usually offer much bigger rewards. Many times, big spenders find this fee worthwhile because they earn enough in rewards to outweigh it. Remember to calculate this expense when budgeting.
One of the major perks of being a new user is the attractive sign-up offer. Don't get sidetracked by the shiny promise of immediate cash back. This is a one time offer that is applicable for new applicants only.
Let's Take a Look at Some Credit Cards
Best Cashback Credit Card: Standard Chartered Unlimited Cashback Credit Card
For a solid cash back credit card, I recommend the Standard Chartered Unlimited Cashback Credit Card. It has a 1.5% cashback on all spending with no cashback cap. Furthermore, there is no minimum spending requirement, which is ideal for beginners. You won't feel pressured to use your card every month. The current welcome offer is S$100 cash back or S$150 Prime Now Credits. This card also conveniently doubles as an EZ-Link card.
To be eligible for this card, you will need to be at least 21 years old. Singaporeans and Permanent Residents require a minimum annual income of S$30,000. Foreigners with employment passes require a minimum annual income of S$60,000. The annual fee is S$192.60, which is waived for the first two years. The Effective Interest Rate is 25.9% p.a. minimum. A late payment fee of S$80 will be charged if the minimum payment due is not received by the due date. Overall, this card is fairly fuss-free and quite rewarding if you pay your bill on time.
Best Travel Credit Card: Citi PremierMiles Visa Credit Card
For a credit card that earns air miles, I recommend the Citi PremierMiles Visa Credit Card. I prefer this card over the HSBC Visa Infinite Credit Card because of the lower annual fee that can be waived. The Citi PremierMiles Credit Card comes with an annual fee of S$192.60, whose 1st-year annual fee is waived and the subsequent years' fees are offset by the 10,000 annual renewal miles (worth S$100). On the other hand, the annual fee for the HSBC Visa Infinite Credit Card is a whopping S$650. Both cards have really great travel perks and mile reward conversion rates.
With the Citi PremierMiles Visa Credit Card, you can earn up to 2 CitiMiles for each S$1 spent overseas and 1.2 miles for each S$1 spent locally. Moreover, you can earn up to 10 miles by booking on select travel sites and up to 14% on fuel savings at Esso and Shell. Your miles never expire, come with free travel insurance and give you 2 annual airport lounge vouchers to more than 600 airport lounges. This card has been known for its generous welcome bonus. Right now, if you spend S$7,500 within 3 months from the date of card approval, you will earn 30,000 miles, after you pay the first annual fee.
To be eligible for this card, you will need to be at least 21 years old. Singaporeans and Permanent Residents require a minimum annual income of S$30,000. Foreigners require a minimum annual income of S$42,000. The Effective Interest Rate is 26.9% p.a. minimum. A late payment fee of S$100 will be charged if the minimum payment due is not received by the due date. Overall, this card is best for average spenders looking to earn miles for diversified purchases and a low to no annual fee.
Best Reward Credit Card: HSBC Revolution Credit Card
The HSBC Revolution Credit Card is for social local consumers. With this card, you will get 5x Rewards spent on local dining, local entertainment transactions and online purchases. This includes travel bookings, recurring bills, and transit payments (EZ-Link payments). Everything else earns 1x Rewards for every S$1 spent. The current welcome offer is a free Samsonite Astra 55cm Luggage or S$100 cash back and 5% cash back on contactless payments of up to S$100.
To be eligible for this card, you must be 21 years old. Singaporeans and Permanent Residents are required to have a minimum annual income of S$30,000. Foreigners are required to have a minimum annual income of S$40,000. If you do not meet the income requirements, a minimum Fixed Deposit Collateral of S$10,000 is required. The annual fee is $160.50 a year, with the first 2 years waived. To earn subsequent annual fee waivers, you must spend a minimum of S$12,500 in one year. The Effective Interest Rate is 25% p.a. minimum. A late payment fee of S$55 will be charged if the minimum payment due is not received by the due date. Overall, this card is ideal for consumers who spend more than S$1,000 per month and want to earn rewards or miles for shopping, entertainment, and dining.
Hybrid Credit Cards: HSBC Visa Platinum Credit Card
The HSBC Visa Platinum Credit Card is a well-rounded everyday credit card that offers hybrid rewards. This card maximizes rewards in both cash back and air miles by offering consumers 5% cash back on local dining and groceries, 21% fuel savings at Caltex and Shell, and 0.4 miles on $1 general spending. In order to qualify for cash back, there is a minimum required spending amount of S$600 per month. Total rebates are capped at S$125 per month. Currently, the welcome promotion is very similar to the HSBC Revolution card. You can choose either a free Samsonite Astra 55cm Luggage (worth S$350) S$100 cash back for new customers(S$50 for existing customers) and 5% cash back on contactless payments of up to S$100. This card is ideal for high spenders who are also HSBC Advance Customers.
To be eligible for this card, you must be 21 years old. Singaporeans and Permanent Residents are required to have a minimum annual income of S$30,000. Foreigners are required to have a minimum annual income of S$40,000. If you do not meet the income requirements, a minimum Fixed Deposit Collateral of S$10,000 is required. Advance banking customers do not pay an annual fee. However, non-customers pay S$192.60 per year, which is waived for the first two years. To earn subsequent annual fee waivers, you must spend a minimum of S$12,500 in one year. The Effective Interest Rate is 25% p.a. minimum. Overall, this card is ideal for high spenders who are also HSBC Advance Customers.
Tips to Manage Your First Credit Card
Tip 1: Before you start running up your credit card, have a budget for everything you NEED to buy. Never budget for every dollar because unexpected expenses always come up. Remember, you don’t need to charge everything and always avoid spending more than you can earn.
Tip 2: Do Not Withdraw Cash From Your Credit Card
Using your credit card to withdraw cash from an ATM is a terrible idea. This is called a cash advance on your credit card and is essentially a very short term loan. They are known to have interest rates that are higher than the normal rates that apply to your card, charge you a transaction fee, and usually accrue interest the day you withdraw. There is no grace period like your credit card has. This means that you may still end up owing interest even if you pay back the amount you borrow the next day.
Tip 4: Don’t Pay Just the Minimum on Your Credit Card Bill
Try to clear the entire bill every month and pay the statement balance. Paying just the minimum will carrying the outstanding amount to the next month along with some nice additional interest charges.
Tip 5: Always Pay Your Bill On Time
Set a reminder on your phone or set up auto payment from your bank account to pay your bill on or before the due date. You want to avoid the late payment fee as well as possibly defaulting for payment delinquencies.
Tip 6: Avoid Maxing Out Your Credit Card
Using too much credit will lower your credit score. "Credit utilization" is a ratio of your outstanding credit card balances to your credit card limits. The less you charge means a lower balance. The lower the ratio, the higher your credit score.
The world of credit is exciting and opens opportunities for you that you wouldn’t normally be able to afford, such as a loan to start a new business or a home loan for your dream house. Credit cards can also be used for big-ticket items, granted you have the cash to pay it back and reward you for buying things at the same time. However, using a credit card is a serious responsibility and can affect your financial future. Pick the credit card that is best for your situation by weighing the annual rate, the type of reward, and the fees attached to your card. Let your credit card pay you back!