Since 2007 when Citibank introduced the Citi Clear Card to target students and young adults, banks all over Singapore have been starting to introduce similar cards with no minimum income requirement needed. The catch though is that the credit limit is set no higher than $500. Reception of the cards are mixed; some feel that introducing easy credit to the young would lead to a bottomless pit of debt, while others find this a great opportunity to start learning how to manage your credit and to display one’s financial independence. As a college (university) student, having a line of credit is very useful. Many a time, school and life expenses require immediate access to a large sum of funds. With credit, I can first purchase through credit, without the need for cold hard cash. You could argue that there are alternative payment methods such as Nets or even debit cards. But having used credit, I can assure you that nothing beats the functionalities of plastic. Of course, I must enforce that students have to understand the dangers of irresponsible credit card use and the risks of debt mismanagement. I’m here simply to educate on the perks of signing up for one, not necessarily to encourage you to do so. It is, still up to your own choice if credit is the thing for you.
Here goes, 7 reasons why I’d sign up for credit cards (and why you should too).
No. 7 – Rewards and Discounts
Tell me now, who in Singapore doesn’t love rewards and discounts? As students (and young adults), every cent counts. While student credit cards tend to not have as many perks as those full-fledged ones, the frills that they offer are largely targeted at the spending patterns of us. Treats such as 1-for-1 movie tickets, discounts at coffeehouses, blogshops offers and cashback deals are just some of the many rewards and discounts up for grabs. Cards such as the Citi Clear Card even has party privileges at nightspots such as Zouk. Why pay when you can have these privileges for free?
Party Privileges at Zouk!
No. 6 – Freebies
Banks offer many forms of freebies when a new-to-bank customer signs up for a credit card with them. Maybank offers an Adidas wristwatch for new applicants to their eVibes Card*, BOC presented me with a power bank when I signed up for their F1RST Card*, while I’ve been offered freebies such as cameras and luggage by other banks to simply take up a new card. No reason to let these free stuff slip by as long as you ensure that you do not rack up huge amounts of credit debt. (*Terms & Conditions apply)
Power Banks are just one of the many freebies I’ve received when applying for cards
No. 5 – It’s a Learning Journey
At some point in our lives, everyone of us will have to encounter debt. Having a credit card with a low credit limit allows us such exposure from a young age as we get manage our own expenses. Having a credit card does not give one a free rein to spend. Instead, it teaches one how to spend within his/her means. (Giving your kid 50 cents pocket money in Primary School and spending within that limit does not count) Defaulting on your bills will result in interest payments of over 20% (still quite manageable with a credit cap of $500), but the thought of having a bad credit history or worst, the guilt and embarrassment should you need someone to bail you out, should be sufficient to make one learn the importance of maintaining a good credit history.
Getting exposed to credit cards at a young age isn’t necessarily a bad thing.
No. 4 – It acts as backup when you’re overseas
Students nowadays travel more often than ever before. In the 80s, unless you’re born with a silver spoon, one probably would not have flown out of Changi until they receive their first paycheck. Today, with Singaporeans becoming more affluent, and with low-cost carriers taking the world by storm, children as young as 3 are flying to far-flung places such as Europe and the Americas. University students like myself tend to have short getaways during school vacations, and grad trip is now like a rite of passage upon convocation. Travelling with lots of cash thus isn’t simply a hassle, but it also offers up the opportunity for pickpockets and theft. Do not get me wrong, cash is still king in any country. But just so in case if you do run out of cash, at least you still have credit to fall back on. Since Visa and MasterCard are so widely received worldwide, you almost do not have to worry (unless you’re exploring some Amazonian Jungle or embarking on a trek around the Himalayas) that acceptance will be an issue. Even if your credit card is stolen along the way, it is only one call away for the issuing bank to freeze the card in case of fraudulent use.
No Cash, No Fuss!
No. 3 – It earns you interest
Huh? A credit card that earns you interest? You must be wondering if I’m out of my mind. What I mean here is that by paying for something through credit, you are effectively buying a good now without having to pay upfront. Think of it as getting a cash advance from the issuer of the card. In a scenario like the following: if I purchase a pair of Calvin Klein jeans for 100 dollars this month (September) through credit, and with my credit card bill only due the month after (October), I effectively have $100 more in my bank account for the month of September. Hence, more interest! Using the concept of Time Value of Money, it is always better to pay later than now. Although the interest earned from $100 is negligible to say the least, it is still interest earned nonetheless. Do however take note that if you default on your bills, then you incur the interest charges (late fees), which will be way more than whatever interest you could earn from keeping that $100 in your bank account for an extra month. So spend wisely, and pay up on time.
It may just earn you cents, but it is interest gained nonetheless
No. 2 – The criteria are relaxed when you sign up as a student
Cards such as the BOC F1RST are open to not only students, but also to working adults. However, if you apply while still a Tertiary Student, it is not required that you to maintain a minimum income. However, if you apply for the card after you graduate, your application will be reviewed as a working adult, and income documents will be required then. Furthermore, annual fees are usually waived off for at least a year (certain cards such as the CIMB Classic MasterCard have a lifetime wavier of annual membership fees) and if you do not have a bad credit history, most banks will be more than happy to forgo the annual charges to keep you as their customer (all you need is to call them up and request for a waiver when the time comes). Hence, why not apply these cards when you’re still a student, and still enjoy them perks even after graduation!
Apply these cards while still a student, and enjoy the benefits even after graduation!
No. 1 – It impresses the girls
While some might say that the Five Cs of Singapore (Cash, Car, Condo, Country club (membership) & Credit card) is kinda outdated as an aspiration for Singaporeans to obtain material possession or to impress others, it is probably still used by many girls in our society to gauge the eligibility of a prospective partner/boyfriend. Despite the $500 credit limit, having credit cards are a visible symbol to one’s success. The perceived value and image that the credit card provides is something that cannot be easily displaced. It gives the impression that one has financial independence, is able to manage his expenses and instantly creates an identifiable sign of affluence.
Credit Cards – One of the 5 Cs of Singapore
I’ve simply mentioned some of the reasons as to why I signed up for credit cards. While the jury’s still out when it comes to the concept of student credit cards, I for one believes that with responsible spending, there can only be benefits on offer, not harm. It is always important to know how the credit system revolves around, and one should always do your research at home and educate yourself (read the fine print!) on the card’s features before committing your application. Once again, the risks of debt mismanagement are very real, but if you know how to manage your expenditure and spending, you will never look at plastic the same way again.
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