How Does Credit Card Work? Navigating Credit Card Use In Singapore

October 13, 2023

A credit card in Singapore is a financial tool that allows individuals to make purchases on credit up to a predetermined limit. It offers a convenient means of payment and can be a valuable asset when used wisely. However, it’s crucial to approach credit cards cautiously, prioritising responsible usage to avoid financial pitfalls.

So, how does credit card work? In this guide, we will shed light on the workings of credit cards, emphasising prudent usage and essential fraud prevention measures for a secure financial journey in Singapore.

Key Takeaways

  • A credit card lets you buy things and settle the bill at a later date.
  • Neglecting a payment may lead to higher interest fees and penalties for lateness.
  • Treat your credit cards with the same caution as you would with cash to ensure their security. This is crucial because mishandling or losing your credit card can lead to unauthorised usage, potentially resulting in financial losses.

Understanding Credit Cards

Credit cards may offer a convenient way to make purchases, allowing individuals to borrow up to a predetermined credit limit. This limit is like a spending cap the card issuer sets based on factors like income and credit history. It’s important to note that exceeding this limit can lead to penalties or declined transactions.

One key aspect to grasp is the concept of an outstanding or unpaid balance. This refers to the amount you owe on your credit card after making purchases.

You have several options when it comes to managing your outstanding balance. You can choose to pay your bill in full, ensuring that you clear the entire amount you owe. Alternatively, you can opt for the minimum payment, which is the smallest amount you must pay by the due date. Making a partial payment is also an option, where you pay a portion of the outstanding balance.

However, it’s crucial to bear in mind that regardless of the payment option you choose, significant interest rates ranging from variable annual percentages of 25% to 29% will apply to any remaining balance and any new transactions you make.

This incurring interest accumulates over time, potentially leading to substantial financial costs if you do not address the balance promptly. Therefore, it’s in your best interest to manage your outstanding balance judiciously to avoid incurring excessive interest charges.

Interested in flexible loan solutions? Click here to discover how GS Credit can help you achieve your financial goals swiftly and securely.

Key Features

The key features of credit cards include:

Annual Fees In Singapore

An annual fee is a compulsory membership charge associated with using a credit card. It serves as a cost for the privileges and benefits the card provides.

It’s important to note that various banks in Singapore impose different annual fees. These fees can vary based on factors such as the type of credit card, its benefits, and the policies set by each bank.

Monthly Statement And Payment Due Date

Your bank will send you a statement summarising your credit card account activity every month. This statement, essentially a bill, provides a breakdown of your spending during that period.

It’s crucial to review it attentively to monitor your expenses accurately. If you come across any unfamiliar transactions or find anything unclear, promptly inform your bank. This ensures that you address any discrepancies or concerns promptly and accurately.

The payment due date is the deadline by which the bank must receive the full payment for your credit card bill. Meeting this date ensures you avoid incurring additional charges like interest and late fees. Timely payments are essential for maintaining good credit score and preventing unnecessary financial burdens.

Foreign Currency Transactions And Conversion To Singapore Dollars

When you make purchases overseas, they convert into Singapore dollars on your statement. It’s important to note that the foreign exchange rates applied might change daily and can differ between banks. These rates typically encompass currency conversion fees or other administrative charges.

To get the specific rates used by your bank, it’s advisable to inquire directly with them. This way, you can clearly understand how your foreign transactions are being converted and accounted for in Singapore dollars.

Free Credit Period Before The Due Date

Upon receiving your monthly credit card statement, you receive a grant of 20 to 25 days to settle the bill and avoid default on payments before the bank initiates interest charges and late fees.

This timeframe, often referred to as the free credit period, allows you a window to make your payment without incurring additional costs. It’s a valuable opportunity to manage your finances and avoid unnecessary financial burdens when used responsibly.

Minimum Sum For Payments

If you choose to pay back only the minimum sum on your credit card, be aware that interest charges will apply to the remaining credit card balance. The bank typically sets this minimum sum at 3% to 5% of the unpaid amount or a fixed figure, like $50, choosing the greater of the two.

If, for some reason, paying the full bill is not feasible, make sure to pay at least the minimum sum by the due date to sidestep late payment charges. Then, aim to settle the balance as swiftly as you can.

It’s advisable to refrain from using your credit card until you fully pay the outstanding balance. This approach helps you regain control over your finances and prevents further debt accumulation.

Interest Charge On Unpaid Balances

If you choose to make a partial payment or settle only the minimum amount required, interest applies to the remaining balance. This interest will also extend to any new purchases you make.

It’s essential to recognise that credit card interest can quickly escalate. To prevent this, ensure you use your credit card only for purchases you can promptly cover. This practice helps maintain control over your finances and prevents unnecessary interest charges from accumulating.

Gifts, Rewards, And Credit Card Instalment Plans

Gifts And Rewards

As you accumulate spending on your credit card, you may be eligible for gifts, cashback, or bonus points. Carefully evaluating how different banks calculate bonus points is crucial since each bank operates with distinct reward systems.

Keep in mind that specific terms and conditions may be in place. For instance, there might be restrictions on cancelling your card within the initial year after receiving a gift.

Credit Card Instalment Plans

Opting for many credit card instalment plans means committing to pay the total amount, regardless of any potential issues with the merchant. This implies that even if the merchant encounters difficulties, you’re still obligated to fulfil the monthly instalments until you settle the full amount.

There are two types of instalment plans:

In-house instalment payment plan: This plan involves the store extending credit directly to the customer. In such plans, the store typically retains the right to reclaim the item if the customer fails to meet their instalment obligations.

Instalment payment plan: This arrangement is a collaboration between a credit card issuer and a merchant. It serves as an incentive for customers to use that specific credit card for the purchase.

Understanding these instalment plans is essential to making informed decisions about your credit card usage and ensuring you meet your financial obligations.

Applying For A Credit Card In Singapore

You can apply through various credit card issuers or banks to obtain a credit card in Singapore. Once the bank or specific credit issuer approves your application, they will issue you a card with a fixed credit limit.

Before this, the credit card issuer or bank will evaluate your income and ability to repay by examining your credit report. So, it’s essential to review your credit report to ensure its accuracy.

You can also get a credit card at roadshows and shopping malls. While a credit card promoter can assist you in completing the application, the ultimate decision to submit the application lies with you.

Eligibility And Credit Limit

Before applying for a credit card, it’s crucial to meet the bank’s eligibility criteria, which often include having a minimum annual income of $30,000.

Even if you fulfil the eligibility conditions, it’s important to note that the regulations set by the Monetary Authority of Singapore regarding unsecured credit limits will still bind you. These regulations are in place to ensure responsible lending practices and safeguard consumers’ financial well-being.

Tips For Applying For A Credit Card In Singapore

  • If you’re uncertain about your ability to manage spending, a debit card could be a prudent choice. Unlike a credit card, a debit card limits your spending to the funds available in your bank account, providing a built-in safety net against overspending.
  • Exercise restraint when applying for credit cards. Only apply for what you genuinely require, even if they come at no cost. Align the number of secured credit cards with your actual needs and capacity to repay. Consider cancelling cards that remain unused.

What To Do If You Lose Your Credit Card Or Suspect Fraud

If you discover that your credit card is lost or stolen or you suspect unauthorised activity, it’s crucial to contact the bank promptly. Make this call as soon as possible and take note of the exact time and date when you do so. This immediate action helps prevent potential financial losses.

Enhance your card’s security by setting up SMS alerts for transactions. This feature will notify you if someone uses your card for charges above a specified amount. This extra layer of vigilance adds an essential safeguard against unauthorised or suspicious activities on your credit card.

Click here to explore our diverse loan options and secure the financial support you need with GS Credit today.


Understanding how does credit cards work is essential for responsible financial management in Singapore. It’s not just a convenient tool for purchases but a financial responsibility.

From managing balances and avoiding interest charges to making informed choices about rewards and credit limits, this guide equips you with the knowledge you need for a secure and prosperous credit card journey.

Remember, with prudent usage and timely payments, your credit card can be a valuable asset, offering convenience and financial security.

Related Articles

How To Refinance A HDB Loan In Singapore What Is Letter Of Credit? A Complete Guide To Types And Applications

GS Credit is made for you

Customized loans add flexibility and affordability to your life.

Get the funds you need in just 24 hours.

Ready to get your cash?

© 2024 GS Credit Pte. Ltd. All Rights Reserved.
License No. 74/2024