GETTING A CREDIT CARD - UNDERSTANDING THE TERMS AND
CONDITIONS
Case Story
Mr Peter Ong had applied for a credit card as his new job required him to travel overseas frequently and he did not want to bring too much cash abroad. Even though it was the first time he was applying for a credit card, he did not read the terms and conditions. Two months after Mr Ong got his new credit card, he lost it while he was on a business trip overseas. As Mr Ong had a hectic schedule overseas, he did not report the loss of his card until he returned to Singapore two days later. When Mr Ong received his credit card statement, he noticed that there were several charges in his credit card which he had not made. When he called the bank to dispute the unauthorized charges, the bank officer informed him that he was liable for the unauthorized charges as under the terms and conditions of his credit card contract, the cardholder would have to pay for all charges made before the loss of the card was reported. Realizing that it was his own mistake for not reading the terms and conditions and not reporting the loss of the card immediately, Mr Ong had no choice but pay for the unauthorized charges. Fortunately for Mr Ong, the unauthorized charges did not amount to a large sum.
How many of us take the time to read the terms and conditions before applying for a credit card? You can avoid unexpected charges and disputes with the card issuer if you spend a few minutes understanding the terms and conditions governing the use of your credit card.
Below are common terms and conditions you should be aware of when using your credit card:
- Under the terms and conditions of most credit card issuers, you are liable for unauthorized charges made to your credit card before you report the loss of your card. If you lose your credit card, call the card issuer immediately. Once you have made a report of the loss, you will not be responsible for any unauthorized charges made after the report is lodged.
- Familiarize yourself with the fees and charges that may be imposed. These include the annual fees for holding the credit card, interest charges on any outstanding and roll-over balance, and late payment charges if you do not settle your bill by the due date. You should also note that the foreign exchange rates used to convert credit card transactions charged overseas into local currency may vary day-to-day and from bank-to-bank.
- Free gifts that you receive with your credit card sometimes come with strings attached. Read the fine print before taking up the credit card and clarify any doubts you may have with the card issuer. Never assume that the terms and conditions are the same for all cards.
- Credit card issuers may change the terms and conditions of the cards issued by them by giving you 30 days' notice. If you do not agree with the changes, you can choose to terminate the card. If you continue to use the card, you implicitly consent to the new terms and conditions.
Below are some facilities that your credit card may offer, and examples of the terms and conditions that govern their use. You should read the terms and conditions carefully including the fine print so that you know what you are getting yourself into when you make use of these facilities.
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Facility
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Terms and Conditions
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Grace Period or Free Credit
Period
A grace period of between 20-25 days is usually given by the card issuer for you to pay the outstanding balance in your credit card in full without incurring interest. |
- You will incur interest charges for the outstanding balance if you choose to pay only the minimum sum or part of the amount stated in your monthly statement.
- Once there is a rollover balance on your credit card, interest will be payable on any new item charged to the card from the moment you make a purchase. This means that you lose the privilege of an interest-free payment period on your new charges.
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Balance Transfer Facility
This facility enables you to transfer your outstanding balances with other banks to your credit card to enjoy a lower interest rate.
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- The special rates only apply for a certain period of time, ranging from 3-12 months, after which the interest rate will revert to the usual rate (typically 24% per annum).
- Other terms and conditions may apply. For example, the special interest rate may only be applicable to transferred balances and not to amounts charged to the card.
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Cash Advance Facility
This facility enables you to withdraw cash with your credit card.
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- A fee of 2%-3% of the cash advance (subject to a minimum dollar amount) may be imposed.
- Interest is typically charged at 2% monthly or 24% per annum from the date the cash advance is withdrawn until full repayment is made.
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Zero % Interest Instalment Plan
Credit card issuers often tie up with different merchants to offer these interest-free instalment plans.
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- You have to pay the monthly instalments on time or the standard interest charge (typically 24% per annum) will apply.
- You may not be able to cancel the card until full repayment is made on your instalment plan.
- If you opt to pay the minimum sum (assuming that it is less than the monthly instalment amount), you will have to pay the usual interest rate on the outstanding balance.
- Refund or exchange of products and services may not be allowed once the instalment plan is approved by the bank.
- You may have to pay a penalty fee should you later choose to opt out of the monthly instalment plan and make full repayment.
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Free Gifts & Reward Schemes
Most credit card issuers offer free gifts to successful applicants and bonus points when you chalk up spending on your credit card.
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- Certain terms and conditions may apply. For example, you may not be able to cancel your card within the first year to be eligible for the free gift.
- Check how the bonus points are calculated. Different card issuers would have different reward schemes and methods of computing your bonus points.
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For more information on what to look out for when applying for a credit card, refer to the guide "Credit Cards: What You Should Know" (PDF, 292KB) produced by the Association of Banks in Singapore under the MoneySENSE programme. The guide is available at the MoneySENSE website at http://www.moneysense.gov.sg. |
