Think back to your first credit card and how you chose it. Did you pick it because you liked the colour, or because a salesman from the bank approached you during your lunch break? Did you sign up on a vague recommendation from a friend about a particular card’s “great perks”? Or did you sign up for the free suitcase?
Here at MoneySmart, we get lots of questions about what the “best” credit card on the market is. Guess what? There isn’t one. Some people think Angelina Jolie is the sexiest woman on earth, while others are more into the likes of Girls’ Generation. Or something. Anyway, the point is, the best card is the one that best suits your lifestyle and spending habits. Here’s how to pick credit cards you’ll actually benefit from.
Identify your major expenditure categories and amount spent
Credit cards reward you for spending on certain things. So obviously it’s pointless getting a credit card that rewards you for spending on a category that you hardly touch.
One example is the OCBC Frank credit card, which rewards you with a 6% rebate for online spending. If you are an online shopping addict, this card would be more appropriate than it would be for someone who buys one new shirt every 10 years. At Giordano.
The next thing you’ll have to consider is the minimum spending you’ll have to satisfy to enjoy the benefits a credit card has to offer.
Let’s use the Maybank Family & Friends MasterCard as an example. To enjoy the 5% cash rebate on groceries, you will need to spend at least $500 in a calendar month. If all your other spending has been allocated to other cards and you don’t think you can spend $500 a month on the card (for instance if you only use this card for groceries but rarely cook at home), you might want instead to get a card like the American Express True Cashback card, which gives you 1.5% cashback with no minimum spend.
Also, plenty of Singaporeans are in love with the idea of travelling for free, and think that an air miles card is the best way to do that. Unfortunately, what a lot of people don’t consider is that they don’t spend nearly enough to ever accrue enough points. Finding a credit card that targets certain expenditure, for instance DBS’s Altitude Visa Signature Card which gives 3 miles for every $1 spent booking flights and hotels, is a much faster way to get to that holiday than just by collecting miles at a base rate. That’s going to take forever.
Check out MoneySmart’s credit card comparison section, where different categories of spending like shopping, groceries, petrol and dining have been set out for you so you can zoom in on the things you spend the most money on.
Choose which rewards categories suit you best
So your credit card, if you use it wisely, will reward you for your spending. But credit card rewards can take on many forms, and not all of these rewards will be something you like. Before you sign up for a credit card, check what the benefits are and whether they’re useful to you. If you hate flying and your idea of a great holiday is going to Sentosa, a credit card that gives you air miles is about as useful as a punch in the face.
Here are the most common categories of rewards:
- Rewards points – Usually exchangeable for gifts in the credit card’s rewards catalogue, which can include vouchers and frequent flyer miles.
- Air miles – Transfer air miles from your credit card to selected frequent flyer programmes and you can then exchange them for flights.
- Cash rebates – Currently the most popular form of reward on the market now, the cash rebates will be deducted from your bill, effectively giving you a discount.
- Discounts – Get an on-site discount whenever you spend in a particular category, the most common being petrol.
- Freebies – Some cards will entitle you to attractive bonuses whenever you sign up as a cardmember or renew your annual membership. You might be given free air miles or gifts such as suitcases or cash.
Compare credit cards on MoneySmart
Credit cards usually offer a mind-boggling array of perks and discounts, so choosing the best ones for you can be quite a task.
When I signed up for my first credit card a few years back, I did research using MoneySmart’s credit card section (true story, I wasn’t writing for them then) to pick out the cards that were most useful to me. That saved me a ton of time, especially as I had no idea which cards were on the market at the time.
These days, to make things even easier you can now sign up directly from the MoneySmart site by simply clicking the “Apply Now” button next to each card, a function that didn’t exist back then. If only everything in life were this easy.
Which are your favourite cards? Share your recommendations in the comments!
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