You will be able to spot the charges on a card statement that cost the most and avoid them.
On the Bangkok trip in lesson 2.1, Jun Hao ran short of baht on the last evening and took S$500 worth out of an ATM with his credit card. It felt no different from using a debit card. A month later he found three separate charges on his statement linked to that one withdrawal, and none of them was the S$500 itself.
Interest on a carried balance is the cost most people know about. A card can also charge you in quieter ways, through fees and rules that only show up when you read the statement line by line. This lesson covers the three that cost the most and the one habit that removes most of them.
A cash advance is cash taken out using your credit card, at an ATM or over a counter. Some cards also treat certain transfers and payments as cash advances, so check your card's terms for the full list.
A cash advance is treated very differently from a purchase. There is usually a fee for each withdrawal, often a percentage of the amount with a minimum charge. Interest usually starts on the day you take the money out, with no interest-free period at all, even if you pay your statement in full. The rate for cash advances can also be higher than the rate for purchases.
Here is how that adds up with example terms. Say the fee is 6% of the amount and interest is 28% a year, charged daily from the withdrawal date. Both figures are made up for the example. On S$500, the fee is S$30. Interest for 30 days is S$500 times 28% times 30 divided by 365, about S$11.51. That is about S$41.51 for borrowing S$500 for one month, before any overseas charges. Jun Hao's third charge was the overseas ATM fee from the bank in Thailand, which he could not have avoided by choosing a different card.
Before you travel, compare what a cash advance would cost with the overseas withdrawal fees on your debit card or other accounts. The numbers are in each account's fee schedule.
Pay less than the minimum, or pay after the due date, and two things usually happen. You are charged a late payment fee, and interest is charged on the unpaid balance as described in lesson 2.1, How the interest-free period works and how you lose it.
There is also a cost that does not appear on the statement. Your card issuer reports your repayment record to Credit Bureau Singapore each month, and a late payment can appear on your credit report. Lesson 1.3, What moves your risk grade up or down, explained why late payments do the most harm of anything on a report, and why the harm grows when they repeat. A late fee is a one-off cost. The mark on your record can affect the rate you are offered on a car or personal loan years later.
The amount of the late fee, and whether the bank waives a first one, is set out in your card's terms. Do not count on a waiver. Some banks grant one on request and some do not.
When you pay in a foreign currency, in a shop overseas or on a foreign website, the card network converts the amount to Singapore dollars. Most cards then add a foreign transaction fee, usually a percentage of the amount. It is not always shown as a separate line. It may be built into the converted figure, so the cost is easy to miss.
With an example fee of 3%, spending the equivalent of S$1,000 overseas costs S$30 in fees. The real percentage for your card is in its terms and conditions.
A second charge can come from the merchant. Some shops and websites abroad offer to charge you in Singapore dollars instead of the local currency. This is called dynamic currency conversion, and the exchange rate it uses is set by the merchant's provider, often less favourable than your card's own rate. Depending on your card, your bank's foreign transaction fee may still be added on top. Choosing to pay in the local currency is usually the cheaper option, though you can only know for sure by comparing.
Most expensive card charges come from a small number of slips: a missed due date, a balance not quite cleared, a cash withdrawal taken because it was convenient. The simplest defence against the first two is to set up automatic payment of the full statement balance from your bank account, by GIRO or through your bank's own arrangement for its cards.
With automatic payment in place, you no longer have to remember a due date, and a full payment means no interest on purchases. Check two things when you set it up: that it pays the full statement balance rather than the minimum, and that the bank account it draws from will hold enough on the due date. Then read each statement anyway. Automatic payment pays whatever is on it, mistakes and unexpected fees included.
Jun Hao will switch on automatic full payment the month his balance is cleared. Before that, he went back through three months of statements to see what he had been paying without noticing. That review is the next step for you, with your own statements open beside you.
Go through your last three card statements and list every fee and interest charge, with the cause of each.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).