I was thinking about writing a series of posts on analysing why and how we invest into the specific stocks in our Share portfolio. Given that we intend to focus much more on building up our ETF portfolio from now, it didn't make much sense to do that any more. Besides, there's also not much point in me dedicating a series of posts on our strategy of buying ETFs every month - more in bad months and less in good months.
I decided to go out on a limb and write about something more controversial - Why I think working adults should use credit cards especially in Singapore. I know this topic is more specific than the actual title of my blog post, which just sounds more catchy. I'm actually going to use my family and the credit cards we have as examples for the points I will make on the reasons for using credit cards. Hopefully this makes the post more personal and relatable!
My brother doesn't believe in credit cards to the point he actually cancelled the one and only credit card he had (which I applied for him soon after he started work because I thought it would be useful for him to have at least one credit card). When my brother drives the family car to the petrol station, he pays for the petrol using Nets, which does not qualify for the many cash rebates you can get by paying for the petrol using certain credit cards at certain petrol stations. For example, the use of Citibank credit cards at Shell stations gets you at least 4% cash rebate. Can you imagine paying full price for petrol in Singapore?
Pay less for utilities
Many households in Singapore have utilities bills from SP Services. My mother used to pay her SP Services utilities bill via GIRO until we realised it's possible to get 1% cash rebate from paying the SP Services recurring utilities bill using her POSB Everyday Card.
Pay less for public transport
We use our POSB Everyday Cards as EZ-Link Cards when taking the bus and MRT. There is an auto top-up function by using EZ-Reload and we get 2% cash rebate.
Pay less for mobile/broadband/cable TV
Most people have some form of telco bills in Singapore. My sister used to pay for her Singtel mobile bill and the family Starhub broadband & cable TV bills via GIRO until we realised it's possible to pay for these bills online using a credit card. For example, you get 3% cash rebate from paying these recurring telco bills by using the OCBC 365 Credit Card.
Pay less for groceries
My mother used to pay for the groceries using cash. It took some time but I finally convinced her to start paying for the groceries using a credit card. You can actually get 3% cash rebate from paying for groceries using the OCBC 365 Credit Card!
Pay less for dining at restaurants
Okay, my family does pay for restaurant dining bills using credit cards but they were using rewards cards i.e. earn points from spending and redeem for stuff. Personally, I'm not a big fan of rewards credit cards since I find the items you redeem for actually encourage you to spend more. The OCBC 365 Credit Card offers 3% cash rebate for weekday dining and 6% cash rebate for weekend dining.
Earn more interest
In Singapore, spending on certain credit cards allows for higher interest to be earned on certain bank accounts. For example, the link between the UOB One Card and the UOB One Account or the link between the OCBC 365 Credit Card and the OCBC 360 Account.
Why use credit cards?
The cash rebates accummulate and work by reducing the credit card bills in the next billing month. Granted, most credit cards have minimum monthly spending amounts before you qualify for the above generous cash rebates. It's S$600 for the OCBC 365 Credit Card and there is a cap of S$80 on the cashback amount per month.
A good way to meet the minimum monthly spending amounts is to combine the spending of related parties. For example, I am the main card holder of the OCBC 365 Credit Card but my wife and mum are supplementary card holders. That way, I combine our separate telco, groceries and dining expenses to meet the minimum monthly spending amount of S$600 without each party having to spend more.
A credit card is a financial tool and a working adult should develop the discipline and learn the skills to utilise it. If you find yourself overspending and incurring large credit card debts, you have a much bigger problem than learning how to invest. I'm not saying you can't be an investor without having a credit card. What I am saying is that the discipline and skills one needs to learn to be an investor is similar to that one needs to learn to use a credit card.
One of the many reasons above should be good enough to motivate you to start using credit cards effectively and efficiently. Don't underestimate the cash benefits from doing so because a working adult in Singapore is actually spending on many of the items I have mentioned above and the cash rebates you are missing out on can really add up. The additional interest you can earn from linking the credit card to the bank account is also significant. More importantly, don't overlook the discipline and skills you will develop from using credit cards well.