If you’re new to the world of credit cards it’s easy to fall in love with the convenience of being able to make purchases quickly and easily. While that’s probably the biggest benefit of using a credit card, it certainly isn’t the ONLY one.

Seasoned credit card users will be the first to tell you that credit cards come with plenty of useful facilities that make them especially important for certain purchases – such as cash advances and 0% interest promotions!

Here are some of the most common facilities you can expect from your credit card(s):

Facilities Most Credit Card Issuers Offer

Credit cards can do more than just enable you to make purchases that you’ll (hopefully) pay back in full by the time payment is due. In fact, credit cards have some pretty useful facilities that’ll come in handy in certain financial situations.

What kinds of situations am I talking about? I mean situations where you need to use your credit card like an ATM card to withdraw cash, making transactions while on holiday or making a big money purchase over 12 to 24 months with 0% interest.

Here are some common facilities to look out for:

Cash Advance

There will probably be times when your current or saving account starts to run low on funds. What the cash advance credit facility allows you to do is use your credit card just like an ATM card to withdraw cash as long as it doesn’t exceed your credit limit.

While useful, this credit facility needs to be used with extreme care for the following reasons:

1. Whenever you use the cash advance facility, most Financial Institutions (FIs) or banks will require you to pay a fee of up to 6% of the withdrawal amount or $15+ dollars, whichever is higher.
2. You’ll be charged interest daily on any cash advance amount you withdraw. Typically, the interest charged daily is about 2% per month or 24%+ per annum from the date of withdrawal until you fully repay the withdrawn amount.

0% Interest Instalment Plan

Chances are good that you’ve probably seen the “0% interest for X months” promotion at many of your favourite retailers (furniture stores, department stores, electronics retailers, etc.). All you have to do is apply for X credit card and then use it to pay for the item(s) you want to get the promotional rate.

Yes, this means you can potentially purchase something (typically a big dollar purchase like a 55-inch HD 3D television) in monthly instalments without having to pay a dollar in interest!

Of course, that depends on you making payments on time and on the retailer’s rules, which might include the following:

• Missed Payments: If you miss a payment or don’t make a payment on time, you’ll need to pay the standard interest rate (usually 24%+)
• Interest on Balance After Promotion Ends: If you make the “minimum payment” for your purchase (if the purchase you made cannot be fully paid for with minimum payments over the 6 to 12 month 0% interest period) and you still have a balance after the promotional 0% interest period ends, you’ll need to pay the usual 24%+ interest rate on the remaining balance.
• Prepayment Penalty: If you want to opt out of the monthly instalment plan and fully prepay the full balance, you might have to pay a penalty.
• No Exchange or Refund: You might not be able to refund or exchange the product(s) you purchased after an instalment plan has been approved.

Foreign Currency Transactions

One of the most useful credit card facilities is the ability to make purchases overseas without the need to carry large amounts of cash. Plus, unlike cash, when it’s stolen, you can always cancel your credit card and dispute any fraudulent charges made with it.

However, before you start using your credit card for every overseas purchase you make, you might want to think about the foreign currency transaction fees you’ll have to pay.

Most FIs and banks follow this process to computing your foreign transaction fees:

1. If your transaction is in US dollars, it is converted to Singapore dollars on the date of purchase. Alternately, if your transaction is made in foreign currency (MYR, HKD, etc.), it will be converted to US dollars and then converted to Singapore dollars. Note: All transactions are based on the prevailing wholesale interbank rates or the government-mandated rate and are determined by the card association (AMEX, MasterCard, VISA, etc.).
2. All credit card transactions in foreign currency are then charged a fee of about 1% of the converted amount.
3. An administrative fee is then charged by the FI or bank for the foreign currency transaction ranging from 1.5% (VISA/MasterCard) to 2% (AMEX).

So in total, you can expect to pay a total fee of 2.5% to 3% on every foreign currency transaction you make.

Balance Transfer

This facility comes in very handy when you’re dealing with credit card(s) that have high rollover balances. Rather than making payments on your credit cards, which carry interest rates as high as 24%+, you can transfer your credit card balance(s) to a new card.

In essence, a balance transfer allows you to shift all of your outstanding balances from one or more credit cards to another credit card that offers a either a very low or 0% interest on any balance for a period of 6 to 12 months.

Of course, there are two things you should watch out for if you plan on using this credit facility:

1. Any new purchases made with the credit card you transferred balances to may qualify for the low or 0% interest rate.
2. You only have a period of 6 to 12 months to pay off your transferred balance at the promotional low or 0% interest rate before the interest rate shoots back up to 17.99% or much higher.

Final Note: Free gifts and rewards for signing up and using your credit card make up another popular facility for card users.

There are plenty of rewards to suit a variety of consumer purchasing habits. However, we’ll be covering these perks in our follow-up article credit card rewards every Singaporean should know about.