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How To Avoid The Credit Card Trap, According To Credit Bureau Singapore

Guest Contributor

Guest Contributor

Last updated 25 August, 2021

Left unchecked, credit card spending can snowball and leave you up to your eyes in debt. Here’s how to avoid the trap of putting everything on credit.

Credit cards have become an integral part of everyday modern life. Especially in this digital age where contactless and mobile transactions are the way to go, it is uncommon to find a peer without a credit card in his or her wallet.

According to the CBS Consumer Credit Index, in the first quarter of this year alone, there were over 230,000 new credit card applications.

However, the growing trend of credit card usage also means that more and more people are susceptible to credit activity.

Want to buy a $15,000 watch but barely have enough sitting in the bank account? No problem, just sign up for the 0%-interest, 12-month instalment plan on the card and the watch is yours.

Eyeing that dream vacation in Europe? Just swipe your card, and you can jet off to your preferred destination (pandemic restrictions aside, of course).

Before long, you would find your total outstanding balance and interest accumulated on the credit cards snowballing, and you would have a hard time repaying the debt.

The way that one can easily slip into massive amounts of credit card debt is similar to falling into a trap. 

Therefore, it is important to manage and prevent accumulation of credit card debt, because having a bad mark for poor payment or default would significantly impact your credit score. It can also affect your bigger or long-term financial goals such as owning your dream house. For example, a default record stays on your credit report for three years even after a full repayment!

Here are three ways that can prevent you from falling into the credit card trap.

1. Know the real costs of ‘rolling over’

Revolving or rolling over a balance may require more interest than you think. There is usually an interest-free grace period of 25 to 30 days at the end of your billing cycle before payment is due.

If you were to make only the minimum payment, the rollover amount would be slapped with an interest of as high as 26% per annum. What’s worse, if you miss the payment, a penalty fee of S$60 to S$100 or even more will be imposed on top of the interest.

Above all, what many people overlook is that regular revolving payment will lose them the grace period for their card spending.

It means that you will start accruing interest on not only your balance but also on your new purchases daily after the due date, resulting in a large balance accumulated on the card as you continue to use it.

Now that you know the real cost involved in rolling over the balance, make the full payment for your card as much as possible. That will also help you maintain a proper utilisation pattern for your card and contribute to a good credit score.

2. Build an emergency fund

Set a ‘safety cushion’ of about two to three months of income. No one knows when an unexpected event such as job loss or illness will hit. When that happens, your income stream stops but you will still have to pay the bills.

An emergency fund can tide you over an unplanned period of unemployment, especially if you had chalked up a significant sum of credit card balance when you were still gainfully employed.

It also ensures that you do not have to resort to using credit cards or cash advance loans to settle your monthly expenses or everyday bills, amounting to a credit debt.

Setting up a ‘safety cushion’ is worthwhile even if you are paying off a mortgage. However, if you have high-interest debt such as outstanding credit cards or cash advance balances, pay it off first before building your emergency fund.

3. Reduce your credit limit

You should spend less than you earn. Yes, the credit limit of that newly approved credit card may look tempting, especially for a fresh graduate who just stepped out into the workforce.

For those who are already holding several credit cards from different issuers, the total credit limit added up from all your cards may well exceed four to eight times of your monthly income.

However, your credit limit does not equate to your spending capacity. More often than not, your credit limit can be way above your ability to repay. Reassess your current finances before you use up your credit limits to get that dream watch or vacation.

Do you have a steady job? What are your monthly expenses? Only spend up to the amount you are confident of paying off in full and not just aim at making the minimum payment.

Control and reduce your credit limit if you find it hard to exert self-discipline and limit your spending on the cards. Notify the banks to adjust and reduce your credit limit to an amount that is within your means to spend and repay.

That way, you can still enjoy the perks and benefits of your cards without worrying about burying yourself in debt.


Be a master and not a slave to your cards. A little planning and self-control will go a long way to keep you out of debt and help you build a good credit score to achieve your financial goals.

If you would like to find out whether you have been keeping a good credit with your cards, you can check your credit score by obtaining a credit report from Credit Bureau Singapore at S$6.42 per copy.

Read these next:
Do You Know What Goes On Your Credit Report?
Financial Health Check: Do You Know Your Debt Asset Ratio?
4 Ways to Pay Off Credit Card Debt in Singapore
What is a Debt Consolidation Plan And How Does it Work In Singapore?
2 Strategies To Consider When Clearing Crushing Debt In Singapore

Credit Bureau (Singapore) Pte Ltd (CBS) is Singapore’s most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions. CBS assists members in their credit approval process and protects their credit profile, by providing objective and factual information collated from members.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

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