Why Almost Every Purchase Should Be on a Credit Card

In high cost-of-living Singapore, using a credit card for every purchase can be a great way to optimise your spending and get the most out of your dollar. Instead of just using your credit card for big ticket items, the widespread acceptance of credit cards and popularity of contactless payments means you can often use a credit card daily for almost anything, from grabbing your morning kopi and paying for groceries to settling restaurant bills and making online shopping purchases.

In fact, using a credit card for everything can unlock a range of benefits:

• Convenience: Reduce the need to carry large amounts of cash and simplify transactions.  

• Enhanced Security: Benefit from fraud protection measures offered by credit card providers.  

• Earn Rewards: Accumulate cashback, air miles, or points on your spending, turning everyday expenses into valuable rewards.  

• Expense Tracking: Easily monitor your spending habits through detailed monthly statements on your credit card.

If you’re still asking “Should I use my credit card for everything?”, read on to find out why you should seriously consider it.

>> Learn more: Are credit cards good or bad

Unless you’re a fugitive on the run, paying with your credit card is almost always preferable to using cash. 

This is because carrying one card around is much easier and more convenient than walking around with a stash of cash. Also, should your credit get stolen or taken, all you have to do is to inform your bank and block your card to keep the funds in your bank account safe. 

On the other hand, cash that is stolen or lost is exceedingly hard to get back. Even if the culprit is caught, they might have already spent the cash they took from you, and there’s no guarantee of compensation.

There’s also the issue of fraudulent transactions. In the event of unauthorised transactions or if you dispute a purchase due to faulty goods or services not received, credit card companies generally provide better liability protection than cash or debit transactions. You are often not held liable for fraudulent charges made on your card once you report the issue. This means that if someone manages to use your credit card without your consent, you have a much stronger recourse for recovering those funds compared to lost or stolen cash. 

>> Learn more: How to protect yourself against credit card fraud

The best credit cards provide a variety of rewards, perks and benefits that ultimately help you save money and make your dollar stretch that much further. 

Cashback gives you straight-up savings on qualifying transactions, while reward points can be saved up and redeemed for anything from shopping vouchers to exclusive products and even help pay off your bill. 

Meanwhile, air miles can be used to pay for air tickets, flight upgrades, hotel rooms and other holiday perks.

To maximise these benefits, users can strategically choose a credit card that aligns closely with their typical spending habits, ensuring they earn the rewards they value most. 

For example, let’s look at Sarah, who frequently uses cashback credit cards for her regular expenses:

While cashback is attractive, it's crucial not to be tempted to spend beyond your usual budget simply to chase additional cashback rewards. For Sarah’s example, the $60 cashback earned on dining, for instance, wouldn't compensate for an extra $100 spent at a restaurant she wouldn't normally frequent.

>> Learn more: Debit vs credit cards in Singapore

Besides convenience and spending rewards, a credit card can be an easy way to effectively track your spending, especially if you only use a single credit card for everyday use. Monthly statements offer a clear breakdown of all your transactions during the billing cycle, so you can see exactly when and where your money is going.

Most modern credit cards also offer ways to budget or categorise your spending via the bank’s app. Some apps even generate visual charts and graphs to illustrate your spending patterns over time, offering insights into your financial habits that might be difficult to discern otherwise. These digital tools offer a user-friendly way to monitor your expenditure and gain better control over your finances as you use a credit card for everything.

>> Learn more: Best budgeting and saving tools

Each time you pay off your credit card bill on time and in full, you’re demonstrating fiscal responsibility and prudence. These are traits that banks and lenders look upon favourably, as they indicate how likely you are to repay a loan in a committed and responsible manner. 

Making on-time payments consistently over time is by far the easiest way to build a positive credit history. It is probably the biggest factor that influences your score in the credit report by the Credit Bureau Singapore (CBS).

Another crucial factor is your credit utilisation rate, which is the amount of credit you are using compared to your total available credit limit. Experts generally recommend keeping your credit utilisation below a certain threshold (e.g., 30%) to show that you are not over-reliant on credit. By maintaining low balances on your credit cards and not maxing them out, even when you use a credit card for everything, you can improve your credit score.

A good credit score is increasingly important for various financial endeavours in Singapore. It can influence the interest rates you are offered on loans, such as personal loans, car loans, and even mortgages. A low credit score might result in higher interest charges, making borrowing more expensive, or in some cases, even prevent you from obtaining the necessary financing.

>> Learn more: 5 ways to get the highest credit score in Singapore

While using a credit card for every purchase can be beneficial, there are certain situations where reaching for a different payment method might be the wiser choice. It's all about being mindful and avoiding potential pitfalls that could outweigh the advantages.

Here are some instances where you might want to think twice before using your credit card:

• For purchases you can’t pay off quickly: Perhaps the most critical reason to avoid using a credit card is when you anticipate difficulty paying off the full amount by the due date. Credit card interest rates can be quite high, and carrying a balance from month to month can quickly erode any rewards you might have earned and lead to a cycle of debt. If you're facing financial uncertainty or making a large purchase that you can't immediately afford, consider saving up or exploring other payment options instead of relying on credit.

• To avoid falling into debt traps: The ease of swiping or tapping a credit card can sometimes make it feel like "free money". However, it's crucial to remember that you will eventually need to repay that amount. If you find yourself consistently relying on your credit card to make ends meet or to fund non-essential purchases, it might be a sign of overspending and a potential debt trap. In such situations, it's wise to reassess your spending habits and consider using cash or a debit card to stay within your budget.

• When merchants impose a high surcharge: Some merchants might add a surcharge or "convenience fee" for credit card transactions to cover their processing costs. Unless the rewards you're earning on your credit card significantly outweigh this extra fee, you'll likely save money by paying with cash or a debit card. Always be aware of any such surcharges before making your purchase.

>> Learn more: Types of credit card benefits you can enjoy