So, you’ve gotten your first job and you’re eager to spend all that money.
But that paycheck is not in yet, and you are already wondering how you’re going to spend that.
Or you’re a student, and you wonder if you can ever get some credit to get those squeaky clean AirPods that Apple just released.
On an interest free loan, of course.
Welcome to the world of credit.
It’s devilish, scary, and definitely not for the faint hearted. These banks are the legal moneylenders after all.
But cross them, and you can be sure that these banks will start sending people down your door. They might not hang pig heads, but they will send you lawyer letter after letter, demanding that you pay.
Know the dangers of credit
Credit, definitely makes you spend more.
It’s scary because you would find yourself doing mental accounting, telling yourself that you can buy, since you’re going to pay next month after all.
That’s where the term ‘payday loans’ come from. You pay loans based on your future pay, rather than the money you currently have.
One thing that has helped me is to ask myself whether I have the money now to pay for it. If I don’t, I won’t buy the item.
Here’s how to get a credit card, if you still want to.
The process today is easier than ever.
First establish a 6-month CPF contribution history
No banks want to lose money with the credit line they give to you. They are essentially issuing you a loan, without you needing to offer any guarantees, beyond your name and signature.
In other cases like homes, at least the bank can repossess your home.
Here, if you’re in your 20s, you might have nothing they can repossess.
That’s why they are extremely careful.
In my first credit card application to Standard Chartered, I was flatly rejected. A month later, I applied again for the UOB One Credit Card, and was once again rejected.
I had never owed any money, (okay maybe my primary school friend still had that 20 cents that I owed), so I couldn’t understand why.
But after I read my Credit Report, I understood.
With no credit history, the bank bases its score on an algorithm that quickly ranks you amongst one of the riskiest people to do business with.
With no history of having paid anything on credit, the bank’s algorithm sorts you as someone who might not actually pay, if they do eventually give you a line of credit.
That’s why it’s called credit. It’s credit to your name, without you really needing to work for it.
It’s solely based on your reputation, according to the algorithm.
Unfortunately, the algorithm does see that lack of history.
That’s why you’re not issued with a credit card.
Are there ways to get around this? Yes.
That’s why I suggest you to first get 6 month’s of contribution history in your CPF, which the bank sees as a marker that you have consistent income, and thus able to pay off your debt.
Make sure your tax is declared (and paid)
Don’t try to find tax-deductible areas in your tax file in your first year, if you do want to get that credit card.
Most credit cards call for a minimum income of $30,000 per year, which averages to $2500 per month.
If your annual returns are below $30,000 (even if you’ve only worked full-time for 6 months), the bank might flag it as a potential risk.
Get the Trust Card
Trust Bank is Singapore’s newest digital bank, and when I applied with them in October 2022, I was quickly issued a spanky new credit card, even though I had no credit history.
Well, it was probably dangerous but I think they did their math.
They probably knew that those who had no credit history was more to do with their age, than because they were genuinely likelier to default.
But beyond that, there are many other reasons.
The Trust Card, for its lack of fees
But beyond that, I love the Trust Card because of its lack of fees, especially on the Foreign Exchange. As someone who buys from overseas merchants regularly, you would slowly notice that banks like UOB, OCBC, take a bank and credit card (like Visa) percentage fee when they process your payments.
This might start off initially being low, but do it long enough, and you would realise that this might add up to quite a lot.
The Trust Card for overseas convenience
In the past, I managed overseas spending with many different ways. I was using multi currency wallets with DBS and then later with Wise (because of its cheaper rates).
Or I would exchanging money.
With Trust now, you just take one card and you go anywhere.
It’s a beautiful process.
The Trust Card, for its 2% interest rates
The Trust Card is also a bank deposit that allows you to earn a 2% interest rate. Sure, it might not be much, but it does add up in due course.
Don’t use the Trust Card for billing
As of this day (21 October 2023), Trust still doesn’t accept GIRO payments into their bank account. The transaction will bounce.
If you’re a student, those student credit cards are available
The student cards from the likes of DBS can be gotten, as long as you upload your student ID.
DBS Live Fresh Student Card
They do have a spending limit of $500 per month though, so you might not be happy to swipe your fancy holiday all on that credit card.
Personally I don’t recommend it because of all the fees.
Pay late, and you get slapped with a $100 fee.
The debt will also compound at 27.8%, chargeable on a daily basis.
I repeat, it’s a daily basis.