These 4 seemingly harmless credit card mistakes can make unwary Singaporeans waste thousands of dollars.
Sometimes, it’s the little mistakes in life that blow up in our faces. Ask any safety expert: it’s when we deal with the small and routine issues that we get careless – and the same applies to our finances. Here are the small mistakes that, left uncorrected, can become major issues:
1. Ignoring the Mail
How do you turn an outstanding S$2+ into a $700+ debt? You can do it by ignoring your mail.
We’re going to tell you about how this really happened to someone in Singapore, without dropping her name (it’s rather embarrassing). And while this story has a semi-happy ending, remember that not everyone gets off the hook this easily.
It started when Sam (not her real name) tried to repay her credit card bill in full, but was short by around S$2+. Sam thought she had repaid the full amount, and then pledged not to use her credit card for the rest of the year (an admirable budgeting resolution).
Whenever the mail came in from the bank, she put it straight in the trash. She assumed it was an invitation for her to take a loan, or a bank statement that would show no activity. She was wrong.
What those letters contained was a message reminding her to pay because she still owed the S$2+, and remember, the minimum monthly repayment is either S$50, or 3% of the amount owed – whichever is higher.
So she could have just paid the remaining S$2+ and been done with it – if she had been aware of it. Instead, Sam ignored the requests, and then got a S$60 late fee slapped on the amount.
She then ignored repeated warnings letters, and her non-payment of late fees over a year (with compounding interest rate of 2% per month) drove the total debt to S$700+. She only became aware of it when she got a letter threatening legal action, so it’s a good thing she read that particular letter.
Don’t worry – she sorted it out with the bank, and some issues were clarified (she should also have gotten a phone call, which she never did). She also didn’t end up having to pay the full amount owed. But you can’t count on every bank deciding to be lenient, and letting the matter slide.
The message here is simple: read the mail from your bank. Slip-ups do happen, especially if you have multiple credit-cards and loan facilities.
There is also a security issue: if some identity thief in Russia has slowly been siphoning cash from your account (say S$20 a month), you would not receive any SMS notification. But the bank may be trying to tell you that in a letter.
So repress the urge to be lazy and dump all your bank letters.
2. Letting a Free Business Class Upgrade, or Flight Ticket, Expire
Credit cards have different policies with regard to air miles. Now these days, it’s become more and more common for credit card air miles and reward points to have no expiry date (check SingSaver.com.sg for some of the best options); but there are still credit cards with which you have a limited time to claim rewards.
About once or twice a year, we will hear the anguished cry of someone who spent a year amassing flier miles, and is just a few miles short of a free air ticket. Then suddenly they log in to their account one day, and discover all their accumulated miles are suddenly reduced to zero.
The reason is that they didn’t check the expiry clause, and now all their bonus miles – to which they may have charged S$10,000 or S$20,000 toward acquiring – are wasted.
The same goes for reward points – there are plenty of occasions where people have been eagerly rubbing their hands, waiting for over a year to claim a S$100 voucher or high-end air fryer, only to see it all vanish due to points expiry.
Please, don’t let this happen to you. Either spend your points/miles before they’re gone, or get a card where the rewards don’t have an expiry clause.
3. Not Checking the Monthly Statement
(This was more common back in the 1990s, when Internet scam sites were even more prevalent than they are now. But it still happens, so watch out).
Amateur scammers use hit and run tactics – they want to rip you off for a huge sum, and then run away. Expert scammers are more cunning; they bleed you dry with small amounts, so you don’t get alert messages from the bank.
A common example of this is through subscription services, with hidden costs. We still hear about people signing up for a cheap internet service, be it movie streaming or online dating, for “just 99 cents a month”.
However, the site may not tell you the “premium” service version (which is the default option) adds S$50 a month. Or that you get access to special features for just S$2 per day, and you have been paying for that option – all 365 days a year.
If you check your credit card statement, you’ll see these things and be able to question them. But sometimes people don’t. They check the credit card statements maybe once every two years, and then realise they’ve paid an extra S$20 or S$50 a month for the past two years.
Needless to say, they can forget about getting a refund by that point; they’ve basically just poured away hundreds of thousands of dollars, for no good reason. And to make it worse, these services can be almost impossible to cancel (no one runs the office, and you may need to cancel the entire card to be free of them).
4. Forgetting to Cancel Unused Credit Cards
There is an annual fee for having a credit card; we’d like you to remember that! Nonetheless, we still meet people who have 7 or 8 credit cards, of which they actively use 2.
In extreme cases, some of these people retain the other cards out of sheer laziness. They auto-renew cards with S$150 to S$200 annual fees, and they may have 5 or 6 of these. If they bothered to review the situation, they would realise they’re potentially pouring a thousand dollars down the drain every year, for no benefit.
Even worse, they sometimes forget to pay the annual fee, and then get hit by penalties.
Have the cards that you need, and don’t rely on too many “spares”.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.