Things to Watch out for


 

What happens if you do not pay the amount due in full each month?

If you only pay the minimum sum (usually 3 - 5% of the outstanding balance or a specified amount, for example, $50, whichever is higher) stated in your monthly statement, you will be charged interest daily, amounting to around 2% per month or 24% per annum of the outstanding balance. Interest will usually be charged on the outstanding balance from the statement date and on any new amounts charged to your credit card.

Assuming that you have an outstanding balance of $1,000 in your credit card statement and you only pay the minimum sum of 5%,

the minimum payment = 5% X $1,000 = $50

If you do not charge anything new on your credit card during the month, the estimated interest charges = 2% X $1,000 = $20

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 (this excludes any late payment charge that could be imposed)

If you do not charge any more spending on your credit card and if you only service the minimum sum every month, it would take more than 2 years to pay off your credit card debt of $1,000. This will cost you about $290 worth of interest charges in the process.

The table below shows how long it will take to pay off the amounts owing below and the amount of interest you will incur, if you only pay the minimum sum each month. 

Amount owing No. of years to pay off amount owing  Total interest (at 24%pa)
$3,000 5.2 $1,623
$5,000 6.6 $2,957
$10,000 8.5 $6,290
$50,000 13 $32,956

Interest charges actually take up a big proportion of your repayments. These hefty charges can be avoided if you pay the full amount on your credit card statement every month.

In addition, if you fail to make the minimum payment on time, your credit repayment record will be adversely affected. Your credit repayment record forms part of your credit report which is used by lenders to decide whether to lend you money. A report that shows late payments might lower your chances of getting a loan in the future or require you to pay a higher interest rate for a loan. Do protect your credit record and avoid incurring credit card debts where you can, especially if it is for items you do not need.

What fees and charges are there?

Fee or charge  What it’s for
Annual fee This is an annual membership fee for the use of the credit card and the supplementary card, if any.
Cash advance fee This fee is charged every time you use your credit card to access extra cash. It normally ranges from 3% to 6% of the amount taken, subject to a minimum amount. This fee is in addition to the interest charged on the amount advanced, which is calculated from the day of the advance.
Late payment fee This fee is imposed if you fail to pay at least the minimum sum by the payment due date.
Finance charges (interest charges) If the outstanding balance is not paid in full by the payment due date (even if you made a partial payment), you will be charged interest on your current purchases as well as on all subsequent purchases. Interest will then be calculated based on your daily outstanding balance at the rate of 0.066% per day (assuming an interest rate of 24% per annum) calculated from the date each transaction was made or the statement date (depending on the card issuer’s practice).

For cash advances, interest will be charged from the date the withdrawal takes place.

Ask your card issuer to explain how interest is computed. The amount could be large if you roll your balance over an extended period of time.
Transactions in foreign currency

Transactions overseas or online charged in a foreign currency will be converted to Singapore Dollars by your card issuing bank. When going through your card statement, you will typically see one amount in foreign currency, and one amount in Singapore Dollars.

The exchange rates used to convert these transactions into local currency may vary day-to-day and from bank-to-bank. The card issuer should explain how the conversion is calculated and if there are any other fees or administrative charges that factor into the final Singapore Dollar amount that is reflected in your statement. An explanation is usually included in the terms and conditions for your card.

As foreign currency transactions are typically made overseas, most issuing banks factor an international transaction fee (also known as a Foreign Transaction Fee or International Service Assessment) into the final Singapore Dollar amount billed. This fee is charged by relevant card companies (e.g. MasterCard and Visa) to your card issuing bank, which typically passes it on to you in accordance with the card issuer’s terms and conditions for the use of the card.  

Overseas transactions in Singapore Dollars

Certain overseas merchants or websites may list products and services in Singapore Dollars or offer to convert your foreign currency transactions into Singapore Dollars. The latter may be called dynamic currency conversion. The exchange rates used to convert these transactions into local currency are determined by the merchants and their payment processors. Consumers should take the time to compare these rates against prevailing exchange rates.

While such overseas transactions are made in Singapore Dollars, your credit card statement may reflect a higher amount from the Singapore Dollar price charged by the merchant.

The difference in amount is due to an international transaction fee charged by relevant card companies (e.g. MasterCard and Visa) to your card issuing bank, which typically passes it on to you in accordance with the card issuer’s terms and conditions for the use of the card.

The international transaction fee may also apply to cash withdrawals (in Singapore Dollars) at overseas ATMs.

An example of how the international transaction fee is applied is shown in the section ‘Understanding international transaction fees’.

Tips for using your card wisely:

a. Set a monthly budget for your credit card spending and keep track of your expenses. Limit the number of credit cards you hold based on your needs and repayment ability. Cancel cards you do not use.

b. Consider carefully before you use your credit card :

Once a purchase is made and the charge slip is signed, the consumer is bound to make full settlement of the charge incurred to the credit card issuer. This applies even if the consumer buys a package of services from a merchant and the merchant closes down its business before the consumer has fully used the package of services. It even applies if the purchase price is paid by the consumer by an instalment payment plan to the credit card issuer.

c. Pay your credit card bill in full every month to avoid hefty interest charges.

d. Make sure you understand the terms and conditions before signing the credit card agreement:

Credit card issuers may change the terms and conditions of your cards by giving you 30 days' prior notice. If you do not agree with the changes, you can choose to terminate the card. If you continue to use the card, you are assumed to agree with the new terms and conditions.

e. Pay off the outstanding balance as fast as possible. Interest will be compounded if you continue to roll over your outstanding balance month after month.

f. Avoid spending up to your credit limit as you will not be able to use the credit card during emergencies when you really need it.

g. Consider using a debit card instead as this limits your spending to what you have in your account. But do remember to set a monthly budget for your expenses and to take precautions to guard against fraud and unauthorised transactions.

What can you do to guard against fraud

Take these steps to prevent someone else from using your credit card or your card information:

  • Sign your cards with permanent ink as soon as you receive them.
  • Keep a record of your card numbers, their expiration dates, and the phone number and address of the card issuers in a secure place. Keep card-related information, such as your password or PIN, separate from your credit card.
  • Keep an eye on your card during every transaction. 
  • Read all details on the sales slip before signing. Never sign a blank sales slip.
  • Cross out any blank space for entering money amounts when you sign a sales slip.
  • Cancel incorrect sales slips and tear up cancelled slips with carbon copies.
  • Save sales slips to compare with billing statements. If you notice any discrepancies, call the card issuer immediately.
  • Mail cheques with your card number on them in opaque envelopes.
  • Tear up pre-approved credit offers before throwing them away.
  • Keep your cards in the same place after use. This way, you will notice immediately if they are lost or stolen.
  • Only shop at reputable and legitimate merchants (including online stores).
  • Update regularly the firewall, anti-virus and anti-spyware installed in your computer to minimise chances of malicious codes, worms or viruses being loaded into your computer.
  • Consider using a credit card with a lower credit limit for telephone and online transactions.
  • Shred old charge receipts, credit applications, billing statements & expired cards.
  • Never leave your credit cards or sales slips lying around.
  • Inform the card issuers immediately when you change your address.
  • Ensure that you provide your bank with your current particulars, such as mobile phone number, email address and mailing address.
  • Inform your card issuer when you go overseas to allow card issuers to better identify fraud.
  • Inform your card issuer if the merchant in Singapore performs a magnetic stripe transaction instead of a chip-based transaction.
  • Register for 3-D Secure (VBV or Secure Code), a free online service designed to make internet transactions safer by authenticating the cardholder's identity at the time of purchase.
  • Ensure your mobile number is updated with the bank for SMS alerts - it keeps you informed of your account activity
  • Use a secure web browser – look for an "s" after the "http" in the web page address or URL
  • Only give your payment card details when making purchases
  • Never send payment information via email as email channels are not fully protected from being read by outside parties
  • Just as you save store receipts, you should keep records of your online purchases in a secured manner. Back up your transaction by saving and/or printing the order confirmation.
  • Monitor and review your monthly statements, especially after an overseas trip. Check all transactions, even the small ones, because criminals try “testing out” stolen accounts by buying inexpensive items rather than large ones. Immediately investigate suspicious activity to prevent any possible additional fraud before it occurs. Promptly notify your financial institution of any suspicious email activities.

Don’t:

  • Sign blank sales slips
  • Give your credit card details (e.g. card number and expiry date) to someone else.
  • Lend your credit card to anyone.
  • Perform online transactions in public places such as cybercafés.
  • Keep card related information like PIN or password in the same place as your credit card.

What are the security features of a credit card?

A number of credit card security measures are adopted by banks to provide cardholders in Singapore security and protection against card fraud. Examples of card fraud include counterfeit fraud, card-not-present fraud, and fraud committed with stolen cards.

EMV chip

EMV is a global security standard for chip card technology. With the EMV chip, you are better protected against fraudulent activities. Chip cards are safer than magnetic stripe cards as the chip prevents its contents from being copied and cloned.

Activation of new card

To prevent the unauthorised use of your new card in the event, the card is intercepted or stolen in the mail, credit cards will be issued and mailed to the customer in an unactivated state. Customers will have to activate the card before it can be used. The bank will inform you how your card can be activated.

Transaction alert

When a transaction exceeding a pre-defined limit is charged to your payment card, your bank will send you a Transaction Alert. Information about the transaction, such as the merchant’s name, type of transaction, and card information will be provided in such alerts. You should contact your bank to lower the transaction threshold to an amount that you are comfortable with.

3D secure

3D Secure is an added layer of security for online payment card transactions. When a Singapore cardholder makes a purchase at a merchant website that uses 3D Secure, the cardholder will be asked to enter a One-Time Password (OTP) before the transaction can be completed.

Do not perform online transactions using shared devices such as computers in cyber cafes.

What if you have problems paying your outstanding credit card bills?

If you are unable to pay your credit card bill, or your payment is overdue, do not panic. Take the following steps:

  • Contact your creditors immediately and request to work out a repayment plan that can help reduce your payments to manageable levels
  • Pay off high interest rate debts first
  • Transfer debts with high interest rates to cheaper alternatives
  • Reduce credit card expenses and cash advances

A failure to keep up your repayments will be reflected in your credit report and could adversely affect you when you apply for a new loan. If you find yourself in this situation, be proactive about working your way out of the debt trap. 

What to do if your card is lost or stolen?

If you lose your credit card, inform the card issuer immediately. If your card is stolen, make a police report and inform the card issuer immediately.

Once you report the loss, your maximum liability for unauthorised charges prior to reporting the loss to the card issuer will be capped at $100. This cap applies provided you have not acted fraudulently, or were not grossly negligent, or did not fail to inform the card issuer as soon as reasonably practicable after you became aware that the card was lost or stolen.

Read the Association of Banks in Singapore's Credit Card Guide for more information.

 

Understanding international transaction fees for transactions in Singapore Dollars

Credit cards have made it easier to purchase things overseas and online. Consumers should be aware of the various fees associated with transacting with merchants located overseas. When paying in Singapore Dollars at an overseas merchant or website, the amount reflected in your card statement may be higher than what you have been charged at the time of purchase.
International transaction fees, as explained in the ‘fees and charges’ table above, are charged to your card issuing bank by the relevant card companies (e.g. MasterCard and Visa) and may be passed on to you. The following table gives an example of how this works. We have used an international transaction fee of 0.8% for illustrative purposes.

 Singapore Dollar Amount International Transaction Fee  

 Final Amount Payable

 S$1,000 S$8  S$1,008 
 Agreed at the time of purchase   Applied at a later time to the Singapore Dollar amount  Reflected in your card statement

Just as you may incur international transaction fees when physically paying at overseas merchants, you may also incur this when shopping online. For example, international transaction fees may be imposed by overseas websites that list their goods and services in Singapore Dollars. Do note that some websites run by Singapore companies (complete with a .sg domain name) may actually collect or process payments overseas, and anything you buy through such websites may be subject to the international transaction fee.

When in doubt, check with the merchant or website operator before making your purchase to find out if payments are collected or processed overseas and whether the international transaction fee will be charged. Such overseas arrangements may also be disclosed in the website’s terms and conditions. Consumers should understand how these fees may apply to overseas transactions in order to best estimate the final sum charged in their card statements.

 

The above information is prepared in collaboration with the Association of Banks in Singapore.