Credit cards can provide tons of benefits, be it discounts or sign-up gifts; these have allured many Singapore women to pack their wallets to the brim with these plastics.

For some Singaporean women however, anxieties about incurring credit card debts have scared them off from signing up for any.

Money: Are you a credit card junkie?
Is it more money-savvy to have as many credit cards as working mum Jean*;
or is it a wiser idea to stay credit card-free like features writer Selena? Image: Corbis

 
THE SINGAPORE WOMAN WITH MORE THAN 20 CREDIT CARDS

Jean*, 46, a Singapore personal assistant and mother of two, admits that she has more than 20 cards although she only applies “for cards when there are obvious benefits, like. . . vouchers or gifts upon signing up.” Jean thinks that “there’s no harm”, since she is exempted from paying any annual fees. She keeps track of when they’re due and calls up the companies to waive the fees. If the companies refuse, she simply cancels the card.

She’s also careful with her expenditure; she keeps separate files for each card and she sorts through her receipts every weekend to check on her expenditure. Jean always pays her bills in full each month to avoid late fees and she carries only three cards around with her; the rest are kept at home until she needs them for a specific department store sale. Jean says: “If it saves me money, why not?”

THE SINGAPORE WOMAN WITH NO CREDIT CARD AT ALL
Features writer Selena Vera Hey, 28, says that her decision is motivated by fears of overspending and her wariness of hidden costs like annual fees and interest rates for credit debts.

She doesn’t own any credit cards – not even a debit card. She chooses to rely on cash and her ATM card, the same card she’s been using “since 1998.” Selena is perfectly fine with being unable to do online transactions; on overseas trips with friends, she’ll simply ask her friends to pay for her tickets and accomodation first. She’ll then reimburse them in cash or via bank transfers.

So which is the more financially-savvy option? We ask Yash Mishra, head of private clients at Ipac Singapore, for her expert opinion on the matter.

1. ARE THERE ANY ADVANTAGES OF BEING CREDIT CARD-FREE?
You’re less likely to spend money you do not have. However, this does not automatically make you good at managing your money or debt. However, a credit card offers flexibility, especially if an emergency arises when you’re overseas – most travellers are unlikely to carry large amounts of cash around.

2. WHAT ARE THE BENEFITS OF HAVING MULTIPLE CREDIT CARDS?
If the cards are tagged to frequently visited stores, and you receive substantial discounts on purchases. When travelling, some establishments also accept or prefer one card over another.

However, it’s not beneficial if you get a card simply because you think you’ll make use of its deals in the future – this almost invites spending as you feel the need to bag a bargain. Also, if you can’t afford certain items without that credit card discount, you should probably be reviewing whether you are living within your means.

It’s great that Jean monitors her card transactions, but the average person rarely displays that kind of discipline. I would caution against having so many cards – there’s the danger of using one card to pay off another, and the accumulation of debt due to poor money management. You may receive regular discounts with your card, but these “deals” also encourage you to spend more.

3. HOW MANY CARDS IS IDEAL?
Yash recommends carrying no more than two or three with you. With fewer cards, you are less likely to miss a transaction or a payment. You can also consider debit cards, which give you the same flexibility as a credit card without the associated risk of high interest rates.

4. HOW DO YOU ENSURE YOU DON’T OVERSPEND WITH A CREDIT CARD?
Once you know your regular spending patterns, you can take control of how you spend your money:

  • Draw up a budget that tracks your income and regular expenses. Work it out as a family, and aim to stick to it.
  • Pay yourself first – always top up your savings before spending.
  • Create a list of what you want to spend on and categorise them into needs and wants – you can then focus on cutting out what you don’t need.
  • Switch to a debit card or carry cash instead of plastic, if you are an impulsive shopper. It sounds old-fashioned, but you’ll feel the pinch of watching your cash exchange hands with each transaction. 

Yash Mishra is the head of private clients at Ipac Singapore, an international financial advice and investment group. Visit the company’s website www.ipac.com.sg to find out more about their long-term financial and lifestyle planning services; call 6512 7000 to answer your general enquiries.

*Name has been changed.

This article was originally published in SimplyHer June 2011.