Should I Get a Credit Card with No Annual Fee?
Choosing a credit card can be a dilemma to contend with. Many leading credit cards boast an array of diverse benefits, but these perks come at a cost, typically an annual fee, that easily amounts to about S$200. On the other hand, there are enticing options that charge no annual fee at all, offering attractive cashback rewards instead of a varied benefit portfolio, which can add up quickly to significant savings.
This raises an essential question: should you get a card with no annual fee? To answer this question, it is first crucial to understand how your credit score works and how your chosen credit card affects your scores.
What is a Credit Score?
A credit score is a vital gauge financial institutions use to assess your credit reliability. In Singapore, this score is calculated based on six primary factors:
- Utilisation Pattern: This factor looks at the debt on your credit card relative to your total credit line.
- Recent Credit: Involves newly acquired credit facilities.
- Account Delinquency Data: This refers to your history of late payments on loan accounts, which will lower your credit score.
- Credit Account History: Longer credit history with prompt payments is seen as favourable and will improve your credit rating.
- Available Credit: This refers to the number of open or active credit accounts.
- Enquiry Activity: Represents the number of new application inquiries in your credit report. Multiple inquiries signal potential risk and more debt, while review inquiries on existing loans don’t impact your score.
This multifaceted structure emphasises that credit management is not merely about immediate behaviour but also about thoughtful planning and long-term strategy. Based on this, how does choosing a credit card with no annual fee then make a wise choice?
Reasons to Get a Credit Card with No Annual Fee
1. Improve Your Credit Score
When it comes to your credit card utilisation pattern, maintaining a card with no annual fee offers a strategic way to boost your performance in this aspect. This is because credit cards with no annual fee often offer higher credit limits that act as a counterweight against your credit card use, positively impacting this ratio.
An example is the Trust card offered by Trust Bank, which allows you to select your preferred credit limit. This customisation puts you in control so you can best tailor your card limit to align with your spending habits, thus enabling you to enhance your credit score.
2. Improve Payment History
Besides affecting your card utilisation pattern, a credit card with no annual fee can also positively impact your payment history. The payment history component of your credit score highlights your ability to pay bills on time and in full. Regularly using a credit card and promptly paying debts can gradually improve this metric.
To illustrate how a card with no annual fee can help in timely repayment, consider the case of Trust Bank’s card, the first credit card in Singapore that allows you to choose your repayment date during card application. Affording this flexibility enables you to select a repayment date that is more favourable to your unique situation.
Complementing this is the Trust Card’s smart reminder feature, ensuring users are reminded to pay on time. This simple yet effective feature promotes responsible credit use, empowering you to strengthen your overall credit score and financial management.
3. Maximise Overall Rewards
If your monthly spending is lower, opting for a credit card with an annual fee may not maximise your overall rewards reaped. For example, cards with annual fees may offer miles as a reward, often two to three miles for every S$1 spent. To redeem a free flight from Singapore to Bangkok, you’d need 25,000 miles. This means spending roughly S$8,300 before you can take advantage of the deal. Moreover, the condition that accumulated miles may expire adds another barrier.
On the other hand, a credit card with no annual fee may offer other benefits, such as cashback and discounts, that better suit your spending habits, enabling you to increase the overall benefits you reap through your card. For instance, the Trust Card helps you to save up to 21% on groceries and food bought from the FairPrice Group and 20% on fuel purchases at Caltex when you spend on your credit card. This enables you to maximise your overall gains with shorter cycles of redemption.
Enhancing Financial Management with Trust Bank
Beyond the perks above, signing up for a credit card with no annual fee is made more rewarding with Trust Bank. With Trust Bank, one tap allows you to switch your card between debit and credit modes to suit your spending needs.
By downloading the Trust Bank app, you can also lock your physical credit card securely if it’s misplaced. This not only ensures convenience but adds an extra layer of security to your financial transactions. If you are looking to get a new card, sign up for credit cards with no annual fee online today with Trust Bank to kickstart your journey towards smarter financial management.