The basics of credit card

One of the most convenient and useful ways to pay is with a credit card. The problem with credit cards is that many people misuse them without knowing the proper way to use them. This can lead to serious financial problems in the future.

Credit cards can be used correctly and without financial danger if you know what they are, what they are used for, and what their limits are.

To help you understand the basics of credit cards, here are a few facts you should know:

What is a Credit Card?
Credit cards are simply another form of payment that allows you to borrow money from a Financial Institution (FI) or bank.

Unlike a loan, which is a long-term form of borrowing, a credit card allows you to borrow typically a smaller amount that you’ll pay back over a shorter amount of time.

Each bank offers its own category of credit cards, but the most common issuers are: 

• Citibank
• DBS
• POSB
• AMEX
• UOB
• HSBC
• OCBC

How do Credit Cards Work?
When you use a credit card, you can make purchases both in-store and online without paying cash. It usually takes you slightly more than a month to pay back that amount without incurring interest. On the other hand, if you don't pay the full amount before the due date, interest (up to 24% - 28% per annum.) will be charged. Banks usually require you to pay a minimum sum each month.

How can i use my Credit Card Rewards?
Banks have introduced reward points on credit cards to encourage customers to use them for purchases.

Today, many banks offer credit cards that come with Reward Points Programs that allow customers to earn points on each purchase they make using their credit cards. With the Rewards Program, customers can redeem points for vouchers, cash back on future purchases, air miles, and many other benefits after accumulating points.

How can i redeem rewards points?
After collecting sufficient points, the credit card holder can redeem those points for a variety of options offered by the bank. Rewards points can be used in a variety of ways, depending on your bank.

• Vouchers - Various credit cards offer vouchers as one way to redeem reward points. These vouchers can be redeemed at a number of stores which the bank may be associated with. Banks sometimes allow customers to use these vouchers for online purchases with certain online retailers.
  
  
• Miles - For travellers who are enthusiastic about traveling, miles are a great option. Some banks offer rewards related to travel through partnerships with booking portals or airlines. Air miles can sometimes be earned directly from purchases made with credit cards. Else, the customer can get their reward points converted to air miles. These miles can later be redeemed for payment of flight tickets or for discounts on flight tickets.
  
  
• Cashback - Another option when it comes to redemption of reward points is cash back. Instead of receiving points for a purchase, the customer will receive a certain part of their purchase amount back as cash back.
  
  
• Other Options - There are a few other options which banks offer customers as a part of their reward redemption program. These include points on fuel purchase, training, classes, availing specialized services, entertainment related purchases. Additionally, card holders can also redeem their reward points in exchange for discounts on vacation packages, hotel bookings, etc. If the bank has partnered with certain store, then customers can use their reward points to make purchases at the store.

To learn more about how you can use your credit card rewards, please visit your respective credit card bank’s website.