Credit Card Guide: Understanding Credit Card Interest Rate And Charges


Credit cards are double-edged swords.

They can help you out in emergencies and become your best friends if you’re making diligent repayments. Otherwise, using a credit card just because it’s there increases your debt exponentially.

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Have you just applied for your first credit card? Do you understand all the secrets about them?

In this guide, we’ll analyse the ins and outs of credit cards. We’ll tell you how credit cards work, but also what not to use them for. Then, we’ll plunge right into matters you care about: interest rate, fees, and what happens if you don’t repay your credit card bills.

What Is A Credit Card?

Underneath all the fancy credit card names given by banks, credit cards are just a card that allows you to borrow money.

With every swipe, you will need to repay the money.

The upper limit depends on several factors, including your income.

This loan is called an outstanding balance. You’ll see it in your monthly statement.

It can be tempting to get credit cards, especially with no minimum spending credit cards.

However, regardless of the credit card you have, the best course of action is to repay this balance fully before it’s due to stop interest from snowballing.


What Shouldn’t You Use A Credit Card For?

We know credit cards are convenient, but you shouldn’t use yours for just about anything. Although you might think you’re withdrawing money for a good reason, not everything qualifies.

It can be smart to make use of the points or discounts by credit cards, especially if you are using platforms such as ipaymy that helps you save time and maximize point collection.

But there are still things to remember:

Never withdraw more money than you’re confident you can repay before the balance is due.

Here’s what you shouldn’t use your credit card for:

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University Tuition Fees 

Credit cards have colossal interest rates compared to student loans.

Don’t worry, we know that education is expensive in Singapore, and without a proper diploma or degree, it will be difficult to even find a job.

If you need an education loan, you can apply with local banks or with a financial institution in Singapore. Both offer comprehensive study loans that can help you with education fees.

Along the way, you can also secure a part-time job to help you with the cash.


“BTO aimai?”

Along with a BTO, comes the wedding of your dreams with your partner. Well, if you are still looking for a BTO, you can check out our step-by-step guide here.

Right, back to the main topic.

Weddings cost a bomb in Singapore, easily ranging from $40,000 to more than $100,000. Couples might need a large sum of money quickly and credit cards do come in handy.

Credit cards elude proper money management with their “buy now, pay later” promises.

On top of that, planning a wedding packs a lot of emotion. That’s why credit cards and weddings shouldn’t mix.

You can easily spend more money than you afford and get into a lot of debt.

Instead, consider a wedding loan or open a savings account if you have the time.


Some credit card issuers in Singapore allow you to pay your taxes via credit card. However, you shouldn’t do that too often. This method incurs additional costs, and it shows you can’t manage your budget carefully.

If you frequently use your credit card to pay for your taxes, it’s best to enrol in credit counselling or a money management programme. Otherwise, use the GIRO instalment plan.


Credit card withdrawals are loans, just like mortgages. So you’re getting in more debt to pay your other debt.

Better alternatives would be to restructure or renegotiate your house loan. Otherwise, you can consider debt consolidation loans from banks and financial instituions in Singapore.

Medical Bills

Everyone knows that medical costs are skyrocketing in Singapore. If you’re faced with a medical emergency, using your credit card isn’t a good idea.

Unless, of course, these fees are small, and you can repay them until the balance is due.

Otherwise, you can consider an emergency loan or one that’s specially-crafted for medical problems. Singapore also offers government assistance for your medical bills, plus some subsidies and grants.

Bar Tabs

If you’re like most Singaporeans, your night-out bill includes pre-game, cab rides, clubbing, and after-party. Even a regular dinner & drinks can set you back a few hundred dollars.

Remember to keep a clear head even when you’re having the time of your life.

Avoid picking up the bill to show off. Your bank account will thank you.

Luxury Items

You should only use your credit card for essential expenses that you can ultimately afford before the due date. Don’t get carried away to purchase branded goods that you eventually don’t need, or anything that you want. 

It’s a much better idea to save up the money. This strategy gives you a sense of satisfaction, teaches you financial responsibility, and keeps you debt-free.


What Are The Credit Card Interest Rates?

We kept talking about snowballing credit card interest rates in this guide. But how much exactly can you expect to pay?

  • If you pay your balance in full: 0%
  • If you can’t pay your balance in full: 25.9-26.9% / year (FYI, this is even higher than personal loan interest rates)

Here’s what you need to remember:

  • Every day you fail to repay your bill, more interest accumulates
  • If you can’t repay your debt until your next due date, you’ll have to pay more interest during the following month
  • You also pay interest for any new purchases until you fully repay those initial buys

You should also consider:

  • Purchase interest when you’re using your credit card at offline or online stores
  • Cash advance interest when you’re using ATMs or gambling
  • Balance transfer interest rate when you’re transferring your debt to another card


What Happens If I Fail To Repay My Credit Card Bill?

If you don’t repay your credit card bills on time, your debt will escalate. Let’s say you have to repay the $2,000 you spent on a Louis Vuitton bag. Your minimum sum payment is $50, and your interest rate is 26%/ year.

In this case, you’d need 94 months for full repayment. That’s almost eight years! You’ll also have to pay $2,700 in interest compared to your initial $2,000 withdrawal.


What Happens If I Don’t Pay The Minimum Sum?

If you can’t afford to repay your debt in full, repay at least the minimum sum. Otherwise:

  • You won’t get access to other unsecured credit cards
  • Your other credit lines may be suspended
  • Your credit score will plummet

Remember: The minimum required payment covers the interest. The sum that remains after this goes towards your outstanding balance.

The minimum payment always goes towards paying the interest charge first and to the outstanding balance second. So, out of the minimum sum of $50, after deducting to pay for interest due, only what’s left is used to pay down the outstanding balance.


What Are The Late Fees For Credit Cards?

Late fees depend on the bank. For example, DBS charges nothing for sums up to $50 but charges $100 for sums above $50. Citi Cashback Card and UOB One Card have lower rates of $20-$60.

The late fees charged depends on your monthly balance. As such, smaller balances may incur higher costs. So, the late payment fee per month can equal your monthly balance.

Remember: Credit card withdrawals are a type of loan which can escalate if you don’t make timely repayments. The longer you take to repay, the more money you owe, the more interest you need to give.

If you are facing financial troubles or in debt, consider getting a debt consolidation plan via the best and fastest financial platforms in Singapore.