Debit Cards Vs Credit Cards

A common way to prevent your credit card balances from getting any larger is to try to make all your purchases the old fashion way, with cash. An alternative to carry cash around is to use a debit card. When using a debit card you are not borrowing money that you agree to pay back at a later date, you are authorizing the store to immediately deduct the amount of your purchase directly out of your checking account. Banks across the country have been encouraging consumers to use debit cards as an alternative to credit cards promoting the advantages of a debit card over a credit card.

At first look this seems like a reasonable approach to rein in your credit card spending and at the same time eliminate the need to carry large sums of cash around. However, you need to recognize all the negatives of taking this approach before you decide to modify your spending habits in this way.

The first issue is that using a debit card doesn’t supply the same restrictions that using cash does. Remember you are making this decision to help you become more conscious of your spending with the goal of exercising greater control over your debt.

The reasoning behind making your purchases with cash is that you have limited your buying power to the amount of cash you’re carrying. If you don’t have the money, you can’t spend it. Using a debit card doesn’t have this very important restriction. You spending limit is not the amount of cash you are carrying at the time of purchase but the balance in your checking account, as well as any overdraft protection you have on the account.

If you plan on using a debit card you better keep track of the balance in your checking account at all times. The purchase you are making triggers an immediate transfer of money from your checking account into the merchant’s account. If you’re not careful you may find yourself bouncing checks that your recently wrote out as a result of a recent purchase. In reality you are not adding a true level of discipline to your spending habits when you move from a credit to a debit card.

Next there is a security concern when using a debit card. There is a major difference between a debit card purchase and a credit card purchase. In using a credit card a bank is entering into a loan agreement with you for the amount of the purchase. When you sign your name you are agreeing to the terms of the loan being offered. The bank is obligated to confirm that the person using the credit card is actually you. If your credit card is stolen and used by another person, you have little or no liability to pay the bank for that outstanding balance. Your maximum liability on a credit card that was stolen is $50.00 but it’s rare for a lender even to collect that from you. Their ongoing business relationship with you is more valuable to the bank than $50.00.

When using a debit card, an authorization is given by the holder of the card to the store to do an electronic transfer. Proof of this authorization is when the cardholder supplies the “pin”. It’s the cardholder’s responsibility to keep the “pin” private. In the event a thief was to gain access to the “pin” he could clean out your account. You are stuck with the loss.

The government has imposed an important level of responsibility on a lender when it issues a credit card. There is business relationship between the lender and the merchant making both entities responsible to you, the consumer. For example you buy a piece of furniture with your credit card and have it delivered. The furniture is damaged and the store isn’t being responsive in making the repair. Consumer protection laws permit you to dispute the purchase with the credit card company, who then withholds payment to the store until you are satisfied with the repair. Your credit card is credited with the full cost of the transaction and you incur no interest charges while the store addresses your problem. In your fight with the store to correct the problem you have a powerful weapon, being able to withhold payment.

If this same purchase were made with a debit card you would not have this weapon available to you. When making a purchase with a credit card you have a no cost insurance policy guaranteeing your satisfaction. Not something you should give up lightly.

My suggestion is to do the following. Take one credit card and use it for all your purchases. If you currently have an outstanding balance on that card concentrate on paying down the balance on that credit card first. Your goal is to have a credit card with no running balance on it and treat it as a debit card. Make all your purchases on that card during the month and pay off the entire balance when the bill comes in.

The benefits of taking this approach are:

  1. You have one less thing to worry about. Your checking account has one less way to be accessed by a thief.
  2. Should the card be stolen, your losses are minimized.
  3. You have all the consumer protections afforded to you by the government whenever you make a purchase.
  4. You don’t have to be concerned with overdrawing your checking account. All withdrawals are done when you decide to focus on paying your bills at the end of the month not every time you make a purchase.
  5. You have an accounting statement sent to you every month itemizing all your charges. This allows you to easily review your ongoing spending habits each month, making changes going forward as you see fit.
  6. When you pay off the entire outstanding balance on a credit card each month there are no interest charges. The bank that issued the card is giving you an interest free loan every month to cover your purchases during the month. It’s a nice feeling getting something back from a credit card for a change!

By taking this approach you have all the advantages of a debit card with none of the risks. What more can you ask for?

Top 5 Credit Cards in Singapore

Credit cards are no longer considered an item of luxury and in fact they have become a necessity for many people. They are considered as plastic money and help people to purchase the products and services that they require. These cards not only offer people with access to instant credit but also make online purchases more convenient for them. There are numerous banks and financial institutions in Singapore that offer a variety of credit cards that cater to the needs of people from all walks of life and different cards come with different types of features, benefits, fees and interest rates.

Here is an introduction to the top 5 credit cards in Singapore:

1. POSB Everyday Card – It is a card that has been designed to offer people in meeting their everyday shopping needs and comes with various deals, promotions and discounts for grocery shopping, taxi booking, paying utility bills etc. The offers the users with cash rebates for all of their transactions and helps them to save a lot of money in the process. People aged 21 and above can apply for this card and they will not have to pay a lot of annual fee for using the services offered with it.

2. Citibank Rewards – It is the ideal card for those who want to enjoy a comprehensive rewards program and earn a decent amount of reward points every time they use their card for any transaction. The best about this card is that, it will offer the cardholders with discounts at some of the most popular stores in Reebonz, Luxola etc. The reward points accumulated can be redeemed for discount vouchers, gifts and lucrative deals from popular shopping outlets in Singapore and abroad.

3. UOB One Card – Being one of the top banks in Singapore, United Overseas Bank (UOB) offers multiple credit cards that are very popular with Singaporeans. UOB One Card is one such popular credit card available to eligible customers in residing in the island. It offers higher cash rebates and allows the cardholders to save money every time they use the card for shopping, travelling, dining and all other transactions. It can offer the customers with good discounts at more than 800 merchant outlets in Singapore.

4. OCBC 365 Credit Card – It is one of the most popular products offered by the Overseas Chinese Banking Corporation (OCBC) in Singapore. With an annual fee under S$200, it can be ideal for those who are looking for a card that offers numerous beneficial features but does not come with a very high annual fee. However, they will need to have a high annual income to apply for this card. They will enjoy great deals and discounts when they use this card to pay for fuel, groceries, dining etc.

5. HSBC Revolution – Arguably, it is the best card for earning reward points in Singapore. Every time the cardholders spend a dollar with this card for different types of transactions, they will earn minimum 1 reward point. They can even earn higher reward points when they use this card to pay for dining and entertainment related expenses. It also comes with fuel benefits and will help the customers to save money every time they use it to pay for their fuel expenses.

Effective Credit Card Game Strategies For the Sub Prime Loan Crisis Climate

Banks have reacted to the sub prime loan crisis by increasing balance transfer fees, offering significantly higher interest balance transfers, and using tricky, even deceptive wording and terms to try to trick credit card holders to get out of low interest promotional rate deals pre-maturely.

While this temporarily takes away some effective tools for playing the credit card game – at least for the time being – there are still effective strategies.

The first strategy is to recognize that it might be necessary to lower your expectations in terms of receiving 0% or super low interest promotional offers from existing accounts. You may get balance transfer offers, but they will be designed toward locking you into terms where the interest rate is at least somewhat profitable for credit card companies. Beware therefore of offers with high balance transfer fees, or for 0% offers with no or low balance transfer fees on accounts where you already have a low promotional rate balance working.

The one exception is for new accounts. Despite the credit crunch, credit card companies still want new accounts if they can open them in the names of credit worthy customers.

Therefore, the best – and for the time being perhaps the only 0% promotional credit offers will come from new credit card offers. If you do not have too many existing accounts, opening a new account should be no problem provided you have good credit, and have not maxed out your current credit cards. If you have many credit cards with zero balances which are not sending you good offers, you might cancel a few of them, wait a month or two, and then apply for new credit with a 0% long term promotional offers. But beware, many of these 0% offers are accompanied by 3-5% up front balance transfer fees with no maximum. Be sure to read all the fine print before taking advantage of any offer which appears “too good to be true.”

A second strategy involves “life of the loan” offers that may come your way. Before the sub-prime crisis, these were often at 2-3%. Now however, these are usually being offered at 5-8% and often have a small balance transfer fee. While these interest rates are not as low as such offers have been in the past, they can offer a decent “holding” rate while waiting for the immediate credit crunch to ease. Recent drops in interest rates by the Federal Reserve accompanied with massive increases in the money supply by the Fed, enabling banks to more easily charge off losses will eventually lead to a loosening of credit, and the likely return of consumer favorable balance transfer offers.

A third strategy which is effective in this economic climate is to make changes in life style that can cut your monthly expenses. There are too many ways to accomplish that than can be easily covered in this article, and they vary significantly from individual to individual. That being said, even a $5 per day reduction in expenses which are then transferred to debt repayment can significantly accelerate your debt reduction.

A fourth – and almost always a good strategy – is to take a sharp pencil to non-performing assets and see what can be shaken loose to pay down debt. Start with your interest bearing accounts. It is frequently better to use those assets to pay off debt, especially if the interest you are receiving on your assets is lower than the interest you are paying on your debt. Another type of assets to review are non-interest earning assets, such as non-essential cars, trailers, furniture, electronics, sporting equipment or gold jewelry which can be sold, with the proceeds being used to pay down debt. This might be a particularly good strategy with items made of gold and silver as gold is currently at record highs near $900 an ounce, and silver near $16 per ounce.

Every dollar of debt you can pay down not only reduces your debt, but also reduces the cost of servicing that debt. No matter what strategy you may elect to employ, it is always a good idea to take a good hard look at your overall position, and develop a workable debt reduction plan that fits your situation.