credit card risks

Everyone has their preferred payment method; some like using cash whilst others prefer new methods of payment like Apple Pay and Google Pay. With the heaps of travel rewards and other tangible benefits from paying with a credit card, it is no wonder that nearly more than three-quarters of the Singaporean population owns at least one credit card. Although credit cards offer great perks, there are many risks associated with credit cards.

It doesn’t matter if you already hold multiple credit cards or if you are a new user, it is easy to make mistakes and understanding the dangers of credit cards can help you cultivate better credit card habits to use credit cards responsibly and avoid the many traps that so many consumers risk falling into every day.

Credit Card Dangers & Potential Ways to Avoid Them

Here are some of the common dangers of Credit Cards and some ways we have identified for you to avoid them.

Temptation to Overspend

Temptation to spend

Access to credit can be tempting when you spot items that you want to purchase but can’t afford. It is easy and convenient to spend money with credit cards, and you don’t feel the pain of cash leaving your wallet. This makes it easy to overspend, a pertinent problem amongst Singaporean youths today. In the long run, a lack of self-control over your finances could ultimately rob you of financial security. Credit limit should be thought of as a loan provided to you by a credit card provider as opposed to ‘free money’ to spend.

How to avoid: Set a personal spending limit with your credit card below your credit limit, based on how much you are willing to spend each month. Be careful not to spend on unnecessary wants that you don’t really need or live a lifestyle that you cannot afford.

Carrying Balance & Incurring High Interest

High Interest

Paying credit card balances in full each month allows you to avoid paying any interest at all. If you carry your balance over to the next month, you could end up paying very a significant amount of interest. Credit card interest rates could vary depending on your card, but they often run high. If you’re not paying your bills in full, then a portion of your payments goes towards interest payments, increasing the time needed to pay off your bills. This could very well be a strong indication that you are spending more than you can afford.

How to avoid: Pay your credit card balances in full every month to avoid paying any interest at all. If you can’t pay in full, try to pay as much as you can each month to bring the balance down to zero before making any more purchases. Bear in mind your financial status at all times before making any future purchases.

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Risk of Debt

Debt Crisis

Remember that using credit cards means taking a loan from credit card providers to make payments. Any time that you borrow money, you are creating debt. The more you borrow without repaying the debt, the deeper you go into debt. Debt could lead to numerous other problems, creating stress, depression, health issues and even family problems. Failure to manage debt, in the long run, could also potentially result in bankruptcy.

How to avoid: Recognize the signs when you are heading towards debt, particularly when you are consistently unable to pay off your balances every month. Stop using credit cards and focus on living within your means with other payments such as cash and debit cards.

Read Also: 2 Easy Ways to Save On Your Daily Groceries and Essentials

Missing Credit Card Payments & Credit Score

Credit Report

Credit Scores are vastly affected by your payment history. Hence, missing credit card payments could have a significant impact on your credit. Not only would missing payments give you a late fee, default records of outstanding or partial payments could potentially be displayed infinitely on your credit report. A bad credit score could affect your chances of getting loans, rates that you pay and types of financial options available to you.

How to avoid: Set up automatic payments such as GIRO, so that you won’t have to worry about forgetting to pay your bills and not paying on time. However, you still need to be responsible for ensuring sufficient funds are available in your bank account when the automatic payment is withdrawn from your account. Alternatively, you could create calendar reminders each month when your monthly bills are due.

Minimum Spending

Minimum Spending

Only a small payment is needed each month to keep your account in good standing and to avoid late payment fees. This is termed as Minimum Payment. Unfortunately, this may give you a false sense of security in your financial status. If you only pay off the minimum amount, your interest will continue to pile up and more time is needed to pay off the credit card balance.

How to avoid: Paying off your balance in full is the most ideal. If unable to do so, pay off the most you can each month to get to repay some part of the principal, instead of reducing the interest only.

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Multiple Credit Cards

Multiple Credit Cards

Every credit card offers varying benefits in various categories. It is understandable to apply for multiple credit cards to enjoy different promotions. However, adding multiple credit cards to your usual spending methods could make it more difficult to keep track of your spending. In addition, holding multiple credit cards in your wallet could make you more susceptible to the above traps mentioned, together with the problem of credit card churning.

How to avoid: Hold no more than three to five credit cards at a time. Take a couple of months to monitor and analyze your spending habits and categorize them. Do you spend mostly on groceries? Or Shopping? Apply for credit cards that offer good benefits for multiple categories and own a maximum of one credit card for each category. Track your expenses via a spreadsheet or spending planner.

Looking for credit cards suitable for you?

If you are unsure of what credit cards are suitable for you, here are some recommendations.

American Express Singapore Airlines Krisflyer Card: Straightforward Miles

  • Annual fee: S$176.55, 1-year waiver, S$53.50 after
  • 1.1 miles per S$1 on local spend
  • 2 miles per $1 spend in foreign currency overseas in June & December only
  • 2 miles per S$1 spend on SingaporeAir online & app, SilkAir, KrisShop in-flight & online
  • 3.1 miles per S$1 spend on Grab transactions (up to S$200/month)
  • Free travel insurance
  • Hertz Gold Plus Rewards & Amex Selects Privileges

If you’re a beginner to travel cards, American Express Singapore Airlines KrisFlyer Card is definitely worth considering. Cardholders earn 1.1 miles per S$1 spend locally, 2 miles per $1 spend in foreign currency overseas in June & December, 2 miles with SIA brands (SingaporeAir, SilkAir, KrisShop), and 3.1 miles on Grab (up to S$200/month). Miles earned are directly deposited into the cardholder’s KrisFlyer account, so there are no complicated transfers or miles conversion fees. Overall, Amex SIA KF Card is perfect if you want an easy-to-use travel card and frequently fly with SingaporeAir.

  • Annual fee: S$176.55, 1-year waiver, S$53.50 after
  • 1.1 miles per S$1 on local spend
  • 2 miles per $1 spend in foreign currency overseas in June & December only
  • 2 miles per S$1 spend on SingaporeAir online & app, SilkAir, KrisShop in-flight & online
  • 3.1 miles per S$1 spend on Grab transactions (up to S$200/month)
  • Free travel insurance
  • Hertz Gold Plus Rewards & Amex Selects Privileges

If you’re a beginner to travel cards, American Express Singapore Airlines KrisFlyer Card is definitely worth considering. Cardholders earn 1.1 miles per S$1 spend locally, 2 miles per $1 spend in foreign currency overseas in June & December, 2 miles with SIA brands (SingaporeAir, SilkAir, KrisShop), and 3.1 miles on Grab (up to S$200/month). Miles earned are directly deposited into the cardholder’s KrisFlyer account, so there are no complicated transfers or miles conversion fees. Overall, Amex SIA KF Card is perfect if you want an easy-to-use travel card and frequently fly with SingaporeAir.

American Express CapitaCard: High Rebates at CapitaLand Malls

  • Annual fee: S$171.20, 1-year waived
  • 2% rebate (4X STAR$) on spend at participating merchants in CapitaLand Mlls in the heartlands
  • 3% rebate (6X STAR$) in CapitaLand Malls in town
  • 1.5% rebate (3X STAR$) on eCapitaVoucher purchases
  • 3-hour complimentary parking across CapitaLand Malls with $1,200 monthly spend

If you’re a frequent shopper at CapitaLand malls or with CapitaLand merchants, the American Express CapitaCard might just be the best credit card for you. Cardholders can earn up to 3% cashback on purchases made with participating merchants in CapitaLand Malls, with additional cashback offered for select STAR$ X’tra Partners. Coupled with the complimentary parking benefits offered across all CapitaLand Malls for cardholders upon a $1,200 monthly spend, the Amex CapitaCard is perfect for you.

If you want a credit card for a specific purpose or wish to compare credit cards to determine the most suited option for yourself, check out our other pages here.

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The convenience and rewards that credit cards offer are indeed tempting, but the lack of responsible use could land you in a disastrous situation. Nonetheless, if you avoid complacency, exercise self-discipline and restraint, and keep track of your spending and financial habits, you could reap the myriad benefits that credit cards bring.

Remember: Be your master of credit, not the other way around!

If you wish to seek more advice on personal finances, do check out our other pages over here.
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Read Also:

How to Reduce Your Singapore Credit Card Fees to Effectively Zero!


The article Real Dangers Of Credit Cards & How To Avoid Them Like A Pro originally appeared on ValueChampion.

How to Reduce Your Credit Card Fees in Singapore to Effectively Zero!