If you own a credit card or are planning to get one, the one thing you must absolutely keep in mind is not to buy big-ticket items using it — unless you have the means to pay them off immediately. Even though credit cards are considered as a financial lifesaver, it is no excuse to get carried away with your purchases. Credit cards can build your credit score, provide you with an immediate source of cash at times of emergencies, and grant you access to rewards and discounts. However, the operative term here is “credit.” This means that you are getting these benefits on credit, and you will eventually need to pay those debts.
From that, it should be common sense to avoid big purchases since you’ll be spending money that you don’t actually have. Being unable to pay back, or to do so on time, can cripple your credit standing and have drastic effects in your financial life. With all these in mind, here are some big purchases you should never make with your credit card:
A car is the second most expensive purchase you could ever make in your lifetime. Even if you follow a tight budget, it would still cost you at least SG$100,000 for a brand new car. The good news is that personal loans, with the help of a legal money lender in Singapore, allow you to borrow enough money to buy a new car.
Given Singapore’s general car policies, there are many reasons why charging this expense on a system that can impose high-interest rates and strict payment policies is not a good idea. To begin with, only a few banks offer a car loan, which makes this service a premium. Whatever loan option is available to you, it can come with rocketing interest rates, which is likely still on top of the default interest rates that come with using credit cards. Essentially, it would just be expense heaped on top of more expenses, making for a truly impractical option.
House or Condo
Another expensive purchase — and often the priciest — that anyone can make is buying a property, whether it’s a house or a condo unit. There are plenty enough of challenges in buying your home, and paying for it is often at the top of the list.
Any desire for homeownership would require plenty of financial planning. In a typical home buying situation, the down payment would be around 20% of the total cost, from which 15% can be taken out of your Central Provident Fund account. Although this is a hefty amount, this still leaves you with the remaining 5%, which usually range between SG$50,000 and SG$1,000,000. Many Singaporeans do not have this on hand, and it could be tempting to charge it on your card with the reasoning that you will be paying for it later anyway. Even if you establish a payment plan and faithfully contribute to it, however, putting this tab on your card will incur higher interest rates, which could significantly add up to your already considerable expenses. The better option, in this case, would either be to save up for that 5% so you can have it on hand when needed, or to check with housing loans that do not require payment through credit cards.
University Tuition Fees
It is without a doubt that university tuition bills can leave a hole in your bank account. While you may be tempted to use your credit card for this particular expense, it would be best to reconsider it. Instead, consider getting student loans. Singapore offers a healthy variety of options to fund your studies, many of which allow students to make smaller payments over longer periods, with interest rates that are far lower than what credit cards provide.
Ask yourself, “Would I rather use my credit card for the purchases mentioned above, or would I rather apply for a personal loan?” Well, the answer is clear. For big purchases, turn to personal loans to connect you with urgent cash resources and to provide you with easy, flexible, and responsible solutions to help you address your financial situation. All you need is to find which one works well for you.