Every time you don’t make full payment you’ll end up paying about of 24%* p.a. interest on your unsettled credit card balance.
Generally, a credit card serves as a financial tool empowering you to buy now and pay later, while enjoying certain exclusive privileges from a wide range of merchants. But for if you’re undisciplined, a credit card can present as a ticking time bomb that threatens to explode with enormous interest charges in case you spend without any restraints and don’t make your full payment by the end of the month.
In Singapore, credit card users normally have to pay a minimum of 3-5% (or a minimum of SGD50) on the credit card bills every month. If you settle anything less than the full balance that is outstanding at the end of the month, you’ll be liable to pay interest which in form of a financial charge. This charge is another 2 % per month.
Simply put, you’ll be paying 24%* p.a. interest on your unsettled credit card bills every time you do not settle your bills in full.
For example, if you owe an amount of SGD 5,000 to the bank and only make the minimum payment every month, you incur $2,957 in interest, so it would take you 79 months to pay off the total outstanding amount.
What is more, the Effective Interest Rate (EAR) that is applicable on your credit card could range from 24% to 28% per annum if you are late for your credit card bill payment and don’t to pay the minimum amount by the due date. This means, that if you miss just one payment, your EAR will be reinstated to the normal EAR only once the minimum payment is made in full.
40% of people under 30 years of age fail to pay their credit card bills in full in Singapore. The main cause of this is rollover debt, i.e., which means that credit card bills are not paid for more than 30 days. The Monetary Authority of Singapore (MAS) revealed that the total rollover debt in 2012 in Singapore was $4.9 billion.
We therefore believe that although a credit card is a very helpful tool to increase the ease of life, it could fast turn into a nightmare in which you end up having huge amounts of debt or even get bankrupt, if you are not careful enough with your credit card payments.
At iMoney, we believe that there is only one way you can avoid these horrifying experience: Pay your credit card bills on time and in full!
Like this article? Then proceed to find out how to avoid paying credit card interest and other unnecessary charges!
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