In Singapore, the reputation of credit cards has been on a rollercoaster over the years. From being one of the aspirational ‘5Cs’ to being synonymous with poor financial habits and spiralling debts.
Because of this bad stigma, some people today still view credit cards negatively and refuse to use them, instead using debit cards for their online and cashless transactions.
The truth is, when used correctly, credit cards convey many benefits to their users over debit cards. They are safer, more rewarding, and more useful. Let’s us explore how.
Credit Cards Are Safer
By now, we have read about scammers being able to transfer tens of thousands in cash out of victims’ bank accounts, or being having their card details compromised and used for fraudulent online transactions.
In such cases, when scammers manage to make charges on your debit card, that money is immediately debited from your linked bank account. You will then be faced with the unpleasant prospect of trying to lodge a report and await a bank investigation before you have any chance of recovering any of your funds.
In the meantime, you are left without your hard earned cash, and this might cause inconvenience at best, or lead to missed bill payments and the resulting consequences of that.
In contrast, you are not liable for fraudulent credit card transactions if you report them promptly, and any charges would usually be frozen while your bank investigates. In the meantime, your cash is still safe in your bank account – where it belongs.
Build Your Credit History
Credit cards allow you to build credit history, while debit cards do not.
This point is especially important for young working adults and fresh graduates, since we typically start with a blank slate for our credit history.
When the time comes to apply for a home, renovation, or other loan, your credit history would affect banks’ decisions whether or not to approve your loan application and how much interest you qualify for.
Banks see a blank credit history as having higher uncertainty, and thus, higher risk, compared to someone who has over the years a good track record of responsibly using credit and paying back the balances reliably.
More Perks to Enjoy
Just compare the benefits of credit cards versus debit cards and it is clear that credit cards almost always give superior cashback, air miles, rewards, and discounts.
Furthermore, banks are also always keen to encourage new customers to sign up with a credit card, and thus provide very attractive gifts and even cash vouchers.
So, for the same dollar you’re spending, why not stretch it by using the right card for the job?
Gain Access to Additional Liquidity
Credit cards are essentially pre-approved credit facilities for their users. If you have multiple cards, you now have access to thousands of dollars of credit that you don’t have to specifically apply for.
This can come in handy in emergencies, such as needing to purchase air tickets home when stuck abroad, or when you have to pay for something first, before being reimbursed, such as paying for items on behalf of your company.
Many credit card also allow you to stretch out large purchases into interest-free instalments at no charge, thus adding to the liquidity benefits.
As you can see, there are very little reasons why a savvy, responsible consumer should not use a credit card if they have access to one. Of course, debit cards are more accessible, since there are no income requirements to using a debit card, which is great for students and retirees.
Always Find the Best Credit Card to Use
It might be bewildering to always need to keep track of which credit card to use at your favourite merchants. To help you with that, use our credit card rewards lookup tool: WhatCard.