Do You Own Too Many Credit Cards?
Open up your wallet now and count – how many credit cards do you have in it? If you have more than three, it is very likely you are underutilising your cards. While credit cards are not a new innovation, it is surprising how many Singaporeans have problems managing them properly.
According to the credit bureau Singapore, the total number of delinquent debtors hit more than 100,000 in 2015. Most of these debtors started their debt small, paying the minimum each month and before they know it, the debt has become too much to manage. The problem with credit card debts is so severe that the government has introduced measures last year to limit the credit facilities available to those with a problematic credit history.
So how should you manage your credit cards effectively? Here are some ideas for you:
Do A Credit Card Audit
Do you currently own more than 3 credit cards? If that’s the case, you should re-evaluate your needs and do away with the others. Eliminate first by those that you hardly used in the past year. Know that even if that card provides you with a discount at a store you frequent, it’s not useful if you are not even using it.
Next, do you currently have any credit card debts? If there are, you should work out a way to repay them and perhaps keep only one credit card you have currently. This is to ensure you can resist the temptation of swiping your card and to get you into good records before you are ready to take on more cards.
Ask Yourself Why You Need A Credit Card
Everyone has their own reasons for getting a credit card – attractive sign up promotions, for accumulating airmiles, or to save on daily spending. All these reasons are sound and fine, but if the credit card is used to pay for what you can’t with your monthly salary, that’s a warning sign. This means that you are probably spending beyond your means. If that’s the case, you might do better with trying to instil financial discipline in your spending before you use the credit card again.
A word of caution before you cancel the ‘extra’ cards – keep the one card that you have for the longest period with a good credit history so as to keep your credit report clean.
Figure out what type of cards you need
By knowing your intentions for getting a card, you will find it easier to choose the most suitable card for you. If you are interested in accumulating air miles, narrow it down to the travel cards that provides you the best value for this category. If you want a credit card for the convenience of payment, get an all-round card that either gives you rewards or rebates on general spending.
While credit cards in Singapore are ubiquitous, you’d be surprised that some still find holding certain exclusive card a status symbol. In this case, it makes more sense to focus on just one exclusive card instead of many mediocre credit cards.
Do not be tempted by sign-up offers
Being a very competitive market, banks here are rather generous with their credit card sign-up rewards. Cash rebates, free luggage, extra air miles are just some carrots these financial institution dangles to us. A lot of us fall prey to the mentality that we’ll sign up on the spot to take advantage of the free gifts before cancelling the cards shortly after. And do you realise that most of the time, that very card is still in your wallet after one year? Despite not using it, it’s time to pay the annual card fees.
Consider your long term usage of the card as a criteria to a new card sign up. So before you sign up for the next card, ask yourself, why do you need it?
While having more credit cards may not affect your credit score, late payments on your credit cards will. Having too many cards is obviously not the best way to track your spending and may be a sign that you already have too many credit cards for your own good. It is thus best to keep to 2 or 3 credit cards in order to optimise your usage.