4 key questions to ask yourself before signing up for a credit card

If you're ready to jump on the credit card bandwagon but are not sure where to begin, don't worry. It's normal to feel overwhelmed when deciding if a credit card makes sense for you as a consumer and which one would be the perfect fit for you.

As it might feel like an impossible task to compare every single credit card on the market, we have put together a series of questions that can guide you along your decision-making process.

1. Why do you need a credit card?

First and foremost, you should consider why you need a credit card and how it will help you meet your financial goals.

There are a multitude of reasons why people find credit cards useful. When managed well, a credit card allows you to build your credit score by demonstrating your ability to make prompt payments every month. This can be useful in the future if you are looking to get a mortgage as the bank will already have a record of your payment history.

Others find credit cards useful as they allow you to earn rewards, miles and cashback on your spending, potentially saving you money in the long run. Getting the most out of a credit card is all about finding the right rewards, miles or cashback programme for your spending and lifestyle.

Whether you prefer to redeem your favourite electronic gadget with reward points, cash in miles for flight tickets or simply enjoy cashback on your daily spend, finding the right credit card for you can translate to thousands of dollars of savings across your lifetime.

2. Are you disciplined in paying your bills?

This might be the single most important question when applying for a credit card. You have to assess your financial discipline and ability to handle the responsibility of having a credit card without accruing debt.

Credit cards have one of the highest interest rates among consumer products. If you are someone who already has tight control of your finances, this should not pose a problem. Be sure you make use of the tools at your disposal like GIRO payments to automate your bills such that you will not forget your monthly credit card bill.

3. What is your profile as a user?

Now that you have considered the fundamentals of owning a credit card, you'll want to think about what type of credit card best suits your needs and lifestyle.

The most suitable credit card for you will depend on what type of benefits you prioritise. The two main categories of rewards that most credit cards offer are miles or cashback. Which one would best suit your needs also depends on what categories you primarily spend on each month.

Let's look at some common profiles to illustrate what you should be looking out for when shopping around for the best credit card for yourself.

The avid world explorer

If you are someone who goes on multiple vacations a year, chances are you’re shelling out a decent amount annually on flight tickets. You’ll want to look for a miles credit card that earns rewards on these transactions as flight tickets are a great way to rack up upsized rewards and the miles you earn can go a long way in subsidising your holidays.

For avid travellers, the KrisFlyer UOB Credit Card is a must-have for you and your lifestyle.

With the KrisFlyer UOB Credit Card , you get to earn up to three miles per S$1 spend on Singapore Airlines, Scoot, KrisShop, Kris+ purchases and your everyday spend. This means that an avid traveller can easily rack up 18,000 KrisFlyer miles, which is more than enough for a pair of return tickets to Bali on Economy Class1, with just S$6,000 spend on flights with Singapore Airlines and Scoot!

You can accelerate your miles even further by making payments on the Kris+ app with your KrisFlyer UOB Credit Card via Apple Pay or Google Pay when shopping and dining at your favourite Kris+ merchants such as Bacha Coffee, Harvey Norman, Paris Baguette and more.

Doing so will earn you up to an additional nine miles per S$1 spend, on top of the existing three miles per S$1 spend. That adds up to a whopping total of up to 12 miles per S$1 spend!

It’s good to note that a minimum annual spend of just S$800 on Singapore Airlines, Scoot and KriShop will allow you to upsize the miles you can accumulate.

The miles you’ll accumulate from your everyday spending (dining, food delivery, online shopping, online travel and transport spend) gets bumped up from 1.2 miles per S$1 spend to three miles per S$1 spend. If you often book flights for you and a partner or your family, this minimum S$800 annual spend is an achievable hurdle.

As if that’s not enticing enough, with the KrisFlyer UOB Credit Card, you’ll get to enjoy special travel-related benefits when you fly with Scoot. This includes additional baggage allowance, standard seat selection, priority check-in and boarding and a booking flexibility waiver. Plus, you’ll also be able to take advantage of perks such as S$15 off ChangiWifi, Grab rides to or from Singapore Changi Airport and more.

The KrisFlyer miles are credited to your KrisFlyer membership account directly, every month, which means there’s no need to pay for conversion fees when you spend on your KrisFlyer UOB Credit Card.

By accumulating KrisFlyer miles every month through spending on regular day-to-day activities, you’ll be able to redeem flights with your accumulated miles in no time. It’s easy to see why the KrisFlyer UOB Credit Card is so attractive for globetrotters and avid shoppers alike.

The trend-setting fashionista

Are you someone who is always up-to-date on all things fashion and beauty? Maintaining a wardrobe to die for is already a full-time job, so you probably don’t want to have to worry about keeping track of your credit card rewards as well. You’ll want a credit card that has flexible, easy-to-understand rewards that allow you to make the most of your shopping.

As someone who spends a large amount of your monthly budget on shopping both online and off, you’ll also want to find a credit card that rewards retail spending. A cashback credit card is, therefore, more suitable as it would be able to effectively let you earn while you shop through the cashback accumulated.

In that case, a credit card like the UOB EVOL Credit Card  could be a good choice for you. The UOB EVOL Credit Card gives 8per cent cashback on both online and mobile contactless payments. Mobile contactless payment refers to all in-store contactless spending done via Apple Pay, Google Pay, Samsung Pay and Fitbit Pay which accepts the UOB EVOL Credit Card.

This means that you are able to earn cashback on all your shopping from your online Taobao shopping sprees to your in-store mobile contactless Sephora hauls. You can even earn cashback on your brunch with the girls after going shopping, as the UOB EVOL Credit Card allows you to earn cashback on all mobile contactless spending whether you eat, drink, shop or play!

The adventurous home chef

Do you have an insatiable appetite for culinary exploration and love to try diverse flavours, not only while dining out but also at home? Foodies everywhere know how expensive it can get buying top-grade ingredients to experiment with different flavours at home.

If you are a budding home chef, you are likely to spend a large portion of your weekly budget on food and prioritise cashback rewards over miles to help offset your grocery bill.

Look no further than the UOB One Credit Card. With the ability to earn cashback of up to a whopping 15per cent on your daily spend including groceries and food delivery, it is truly a must-have in every foodie’s wallet.

The UOB One Credit Card allows you to earn a quarterly cashback of up to 3.33 per cent on all your retail spending, including dining out. For the home chefs, the UOB One Credit Card also offers an additional cashback of five per cent–6.67 per cent at the DFI Retail Group including supermarkets like Giant, Cold Storage, CS Fresh and Jason’s Deli.

That’s not all! For new-to-UOB credit cardmembers who apply for a new UOB One Credit Card between July 1 and Dec 31, 2023, you’ll be eligible for an enhanced cashback of another five per cent–6.67 per cent on top of all the cashback you are already receiving, bringing the total cashback up to 15 per cent.

We all know that with the inflation that we are currently experiencing, weekly food shops and daily essentials can easily be upwards of S$100. The high cashback that UOB One Credit Card offers presents significant savings for everyone, particularly for those who love to cook and are able to take advantage of the additional 5per cent–6.67 per cent cashback at supermarkets.

4. What are the annual fees and minimum spend?

Last but not least, after considering all the different rewards and perks of various credit cards and which ones are the most suitable for you, you have to take note of any fees you may have to incur as well as the minimum spending you may have to meet to really maximise your rewards.

If you’re worried about annual fees eating into the savings your credit card provides you, make sure to keep an eye out for credit cards that offer an annual fee waiver.

The UOB EVOL Credit Card  is a great example of such a card. You get to enjoy no annual fees as long as you make three transactions every month. This is a low and achievable hurdle that almost all consumers are able to meet, making it suitable for just about anyone looking to get a credit card — even if you are a first jobber!

Other cards like the KrisFlyer UOB Credit Card and the UOB One Credit Card  offer a first-year annual fee waiver. Being able to save on any annual fees is definitely a perk worth looking out for to maximise your returns on your credit card spend.

As for minimum spending requirements, all three UOB cards have reasonable minimum spending criteria. As previously mentioned, the KrisFlyer UOB Credit Card has a minimum S$800 annual spend on Singapore Airlines, Scoot and KrisShop purchases in order to be eligible for the accelerated rewards of up to three miles per S$1 spend on dining, food delivery, online shopping, online travel and transport.

If you're going through a travel lull, don't fret — you will still be able to accumulate the minimum S$800 annual spend via KrisShop.

The UOB EVOL Credit Card  has a minimum spend of S$600 a month and the UOB One Credit Card has a minimum spend of at least $500 a month on all spending to earn the prevailing cashback.

Make sure to consider if you are able to meet these minimum spend requirements, or you may not be eligible for any cashback rewards. For the average adult spending in Singapore, these minimum spending requirements are once again fairly feasible.

Now that you have been armed with this checklist, your journey of finding your ideal credit card should be a little smoother. Once you have decided which credit card makes the most sense for your lifestyle and needs, make sure to take advantage of any sign-up promotions to truly get the most bang for your buck.

ALSO READ: Best credit card promotions in Singapore (February-May 2024): Citibank, DBS, HSBC, UOB, and more

This article was first published in ValueChampion.