A BankBazaar Singapore survey conducted this year has revealed that almost 77% of Singaporeans own at least 1 credit card. Among this set, half the members have 2 or less cards while almost a quarter (23%) have more than 5 cards.
Assuming that you don't fall into the 23% category who don't use cards, there is no point in reintroducing you to credit card 101: the basics. Instead, we have decided to examine the consequences of juggling between multiple cards – is it worth it? If yes, how? If no, why not?
Are You in Your Mid-Thirties or Older? You're Probably Using More Than Five Cards!
The Bankbazaar Singapore Survey further revealed that people aged 35 and above have greater chances of owning 5 or more cards. It was also said that almost 50% in the 18-24 years age group own 1 card only while those in the 25-34 years age group own between 1 and 3 cards.
Now, it's possible that you have been using multiple cards to maximise the benefits, privileges, and perks you can enjoy with multiple cards. In fact, the survey also categorises the reward types from the most appealing to the least appealing. The order is as follows:
- Shopping discounts
- Rewards points
- Dining discounts
- Petrol discounts
- Travel privileges
- Air miles
- Lifestyle discounts
You can definitely maximise the rewards you enjoy on different cards if you know how to optimise their use and have the knack of using the right card for the right occasion. You would probably not be too surprised to learn that the survey has also identified the three most popular monthly card spend categories.
Based on the amount spent on each transaction and the frequency of transactions in a month, the most popular categories are as follows:
- Online shopping
Singapore is a thriving market for credit cards. Customers, such as yourself, have different needs and expectations. Hence, most card issuers, rather than stuffing every single benefit or reward in a single card, have distributed them among cards, based on the primary purpose of use of a card.
It's important that you analyse your card spending pattern to get the maximum rewards out of your cards. If you spend most on grocery, getting a card that has marked the largest share of the rewards pie for online shoppers, won't help your cause too much, right? You need a good grocery card.
Start researching for the best grocery cards. That would help you whittle down your list and find the right card.
Which Age Group Uses Their Card for Which Spend Category Primarily?
Those in the 45-54 age group (50%) are more likely to use their cards on grocery than the total sample size (25% of those interviewed).
Yes, you guessed it right! Online shopping is significantly more popular among those in the 18-24 age bracket. 21% in this group use their cards for online shopping against 14% of all respondents who use their card on the same spend category.
Those aged 25 and more were also seen to use their card more frequently on payment of utility bills and services in a stark contrast with those aged below 25. It was also noted that age is inversely proportional to card spend on entertainment, meaning as one grows older in Singapore, one is less likely to use their cards for entertainment purposes.
It was also seen that 37% of the households with a monthly income in excess of S$8,000, are more likely to use their cards for transport.
That still leaves us with the important question. No doubt that you have multifarious needs and it's true that different cards satisfy different needs better. But, does the use of multiple cards prove to be beneficial in the long run?
Before we get into that discussion, here are a few more important data points from the survey:
- People in the age group of 35-44 charge either between S$1,500 and S$3,000 or less than S$5,000 to their cards.
- People in the age group of 25-34 charge between S$4,000 and S$5,000 on their cards.
- On an average, 71% of the respondents said that they charged less than S$1,500 to their main card every month.
Can Charging Money to Multiple Cards Be Useful?
In one word? Yes. Notwithstanding the downside risks, multiple cards can help you in the following ways:
- If you use a grocery card for grocery, a co-branded card for transactions at the partner merchant outlets and air miles cards for booking air tickets, you'll be earning rewards at a much higher rate, on the relevant spend categories. True, that there are cards that are a concoction of miscellaneous benefits. But, the rate of earnings is usually more muted. You can stretch your dollars more when you earn a higher quantum of rewards for a constant monthly spend on specific categories.
- If you have more than one card, one can act as a backup for another. If your card is declined for some reason or you have stacked up a huge debt on one, you can switch to another. This arrangement can be especially useful if you lose a card when you're travelling. Remember, you enjoy the facility of emergency money disbursal with only a handful of premium cards.
- You can have access to more credit. While there are risks, if you manage your cards properly, you can lower your credit utilisation ratio. However, to really make this work, you'll have to prevail over your temptations and ensure that you don't use up too much of the aggregate credit available.
- There are some cards that offer country-specific benefits such as the UOB JCB Card. If you travel to Japan often or love visiting Japanese restaurants in Singapore, getting this card is one step in the right direction. There are many others that waive the foreign transaction fees, helping you save while you travel. Therefore, when your spending needs are more scattered, it makes sense to have multiple cards as you can save big. For example, it can make perfect sense for you to simultaneously maintain the BOC Qoo10 World Mastercard, mainly for public transport (hoping you commute daily), and the Citi Rewards Card for shopping (if you're a frequent shopper). Analyse your spending necessities and apply for cards accordingly.
- You may also cash in on the promotional offers and special deals when you utilise multiple cards. Many card issuers also offer additional rewards from time to time, especially during special occasions. By having multiple cards, you can benefit more from such offers.
However, there are risks, too. One can never be too careful with these. A few tips have been shared in the next section. Enjoy!
Why Should You Be Cautious When Dealing With Multiple Cards and How Can You Manage Them Better?
Maintaining more than one card can at times get tricky. Here are a few ways in which you can avoid trouble and enjoy the convenience that these cards offer:
- Try to pay down the monthly balance on each of the cards within the due dates: As discussed earlier, having a larger credit limit can lead to irresistible temptations. You'll have to ensure that you don't go overboard with your spending, even when you have multiple cards at your disposal and each of them has some unique benefit/privilege/perk to offer.
However, something which is even more important is that you'll have to keep track of spends on all your cards and ensure that the debt is cleared in full on all your cards, at the end of each month.
Carrying forward balance on one or more cards will mean that you'll have to pay interests, late payment charges and other fees. Even if you decide to carry forward balance, do so on the card that charges the lowest effective rate of interest.
To know that, you'll have to pore over each of the card brochures and clauses with close attention. Contact your bank, if you're unsure of how the interests and charges are calculated.
- Keep track of the credit limit on each card: While maintaining the overall credit utilisation ratio to preferably below 30% is important, it isn't enough. It is also important to make sure that you don't max out individual cards. Hence, check out the card limits and ensure that you stay in a comfortable zone with the credit utilisation factor.
- Don't start to overspend just to earn rewards: While it's true that getting rewards on every dollar you spend can increase your purchasing power and the value of each dollar spent, it is equally important to keep in mind that overspending can lead to debt pile up and low savings. Both these factors can individually or jointly cancel out the utility of the rewards you have earned or expect to earn.
- Don't start applying for too many cards too often: Applying for too many cards at the same time or in quick succession isn't a great idea. It may impact your credit score and risk rating. That's because you'll come across as someone who is too needy or someone who is perpetually indebted.
Most lenders might also start considering you as a high-risk client because of over-leverage. This means that the next time you need a home loan or a personal loan, lenders may either turn down your application or hold back the best deals and interest rates from you.
- Set up reminders for bill due dates for all your cards: When you have to juggle between multiple cards, keeping track of all the due dates can be challenging. Missing out on payments, however, is the single gravest crime that you can commit under the credit card penal code. On a more serious note, if you miss even a single payment, you not only run the risk of attracting higher fees and interests but also run the risk of doing damage to your credit score.
If you're, however, yet to apply for your first card, we suggest that you do so quickly. You don't know how much you're missing out on. An expensive evening dress today? An expensive foreign trip tomorrow? You can spice up your life so much more with the right card.