4 Things You Can Gain By Not Buying That Chanel Handbag

 Chanel Handbag

A friend hailing from overseas once commented that she was amazed to see so many genuine Chanel handbags being toted around on the MRT in Singapore. In fact, most of my female friends have at least one bag from Chanel, costing about $5,000 to $7,000 a pop.

And no, most of them aren’t the daughters of tycoons but middle-income saleswomen. Now, nobody’s judging, but am I the only one who thinks it’s weird that to so many Singaporeans, $5,000 represents a chance to buy another Chanel bag… and not the chance to go on sabbatical for a month or two? Here are 4 things you gain by NOT buying that Chanel handbag:

1. Less stress

One of my friends, whose modest handbag collection is worth at least $20,000, tries to save money by having only two vegetable dishes with her economy rice at lunch. While her salary is above the national median, she is constantly stressed out by the rising cost of living. Because seriously, who isn’t?

But that’s the whole point why you might want to not go out and spend all your money on a Chanel handbag. If my friend could trade her Chanel 3.55 for cash right this minute and put it towards her emergency fund or invest it for retirement, she might just find herself feeling a little less pessimistic about the future.

2. Early retirement

Despite the general consensus that the average Singaporean citizen is pretty much doomed to put his nose to the grindstone well beyond retirement age, it seems that many do little besides complain.

Just imagine you hadn’t spent that $5,000 on a Chanel handbag. Instead, you invested the money at a rate of 5% per annum. In 30 years’ time, thanks to the power of compounding interest, that $5,000 would have become… $21,609.71. If your handbag cost $7,000, your investments would have ballooned to $30,253.60.

Now, if you spend $2,000 a month, that means that one Chanel bag could be making you retire around 1 year later. Is a Chanel bag really worth an extra year of toil? You be the judge.

3. More free time

While Singapore has its fair share of billionaires (and children of billionaires), many average income earners have Chanel bags, too. Assuming you earn an above-average salary of $4,500, it means that a $5,000 to $7,000 Chanel handbag is worth more than one whole month’s worth of salary.

Instead of spending 1-2 months’ worth of salary, you could have taken an entire month of unpaid leave to go see the world or just rest your tired body, no doubt overworked from having to toil to fund all those Chanel bags.

People often look enviously at young people who take time off in between jobs to go travel the world or pursue their hobbies. Well, if you held off on buying that high-end designer bag, you would technically have saved enough money to survive for at least a month or two without being paid.

4. Spending money on experiences

As much as it lets you channel your inner Audrey Tautou (or so you wish), that Chanel handbag isn’t going to make your life more interesting. So the next time you complain that there’s nothing to do in Singapore, think about what you could have done with the money instead of buying another bag.

Here’s what $5,000 can get you:

• 3 years of unlimited classes at Pure Yoga, probably the poshest yoga studio in Singapore
• A high-end DSLR camera + lenses and accessories +  a full suite of photography classes
• 1-year unlimited membership at Evolve MMA gym + full set of equipment and accessories
• Flight to Australia + hotel stay of 3 nights + 10 skydives (if you’re really that into it)
• A years’ rent in a luxurious Bangkok apartment
• 10-weekend trips to Bali including flights and stays at luxurious resorts

Do you have a Chanel handbag? Why or why not?

The post 4 Things You Can Gain By Not Buying That Chanel Handbag appeared first on the MoneySmart blog.

Why Americans are Getting New Credit Cards

Credit Cards

NEW YORK (AP) -- A big change is happening inside your wallet.

U.S. banks, tired of spending billions each year to pay back fleeced consumers, are in the process of replacing tens of millions of old magnetic strip credit and debit cards with new cards that are equipped with computer chips that store account data more securely.

By autumn, millions of Americans will have made the switch from the old magnetic strip cards. That 50-year-old technology, replaced in most of the world, lingers on the back of U.S. cards and is easily copied by thieves, leaving people vulnerable to fraud. Roughly half of all credit card fraud happens in the U.S. even though the country only makes up roughly 25 percent of all credit card transactions, according to a report by Barclays put out last week.

This entire switch is a massive undertaking. Roughly half of all U.S. credit and debit cards will be replaced by the end of the year. Tens of thousands of individual merchants need to upgrade their equipment to allow for chip transactions instead of "swipe-and-sign" ones. If the stores aren't ready, they could be on the hook to cover the cost of fraud.

Here's how the new cards work and how the switch could affect you at the checkout counter:

WHAT'S DIFFERENT ABOUT THESE CARDS?

The biggest difference between your old card and your new one is the metal chip embedded on the front, which means your personal data is much safer. The chip assigns a unique code for every transaction made on your card. Even if a thief acquired that code, it couldn't be used to make another purchase.

Chip cards are also harder to duplicate, although it's not unheard of. Overall, the chip cards are more secure than magnetic cards, which are vulnerable because once thieves get a copy of your credit card information, it can be quickly copied onto counterfeit cards.

Chip cards have been common in Europe for more than a decade, and they've been standard in other
parts of the world for some time.

"The chip technology is designed to prevent copying of the card," says Ellen Richey, vice chairman of risk and public policy at Visa.

In the U.S, chip-embedded cards have seen limited use until now. Laundromats, for instance, are one place chip-reading cards are being used.

WHEN WILL I GET ONE?

At this point, the majority of magnetic-stripe credit cards have been replaced with chip cards. Banks are in the middle of issuing chip-based debit cards, with Bank of America starting late last year and Chase and Citi starting this summer. Regional and smaller banks are also rolling out these cards to their customers, most of them starting later this year.

All chip cards also come with a magnetic strip in case chip readers aren't available. However, if a merchant does accept chip cards for purchases, you should use that option every time because it's more secure.

WHO'S BEHIND THE CHANGE?

The change is mostly coming from banks and payment processing companies — Visa, MasterCard and American Express. Banks have wanted a more secure form of payment because they have generally been on the hook for any fraud that happens on their cards. Originally the banks were relying on their own software and data from the payment networks to catch fraud at the point of sale in the U.S., but it became clear something more was needed, Richey said. Banks, particularly small banks, would often pay out of pocket to cover any fraud that happened on their customers' payment cards. The American Bankers Association estimated that bank account fraud cost the industry $1.74 billion in 2012, the most year the data is available.

The payment networks have set a soft deadline of October 1, 2015, for the switchover to be made. After that date, most merchants who continue to accept magnetic strip cards and have not upgraded their equipment could have to pay for any credit or debit card fraud that happens in their stores. The "liability shift," as it's called, presents a looming deadline for the banks, payment companies and merchants.

HOW DO I USE THE CHIP CARD?

Instead of swiping your card at the checkout, you'll insert it into a machine with a slot like those on ATMs. Your card will stay in the slot until the machine tells you to remove it. Unlike magnetic stripe cards, chip cards need to be left in the machine for a few seconds to work.

WHERE AND WHEN CAN I USE MY NEW CHIP CARD?

You can use it now. The problem is that merchants need the right equipment to accept the cards embedded with chips. Many stores have been slow to upgrade their equipment, despite the October deadline, because it could be a significant expense to replace equipment and retrain employees. Payment processing companies like Visa, and the bank who issued the cards, are pushing stores to accept the chips cards. Visa expects roughly half of all merchants to have chip card readers by the end of the year.

ANYTHING ELSE CHANGING?

The new cards won't work quite the same way they do in Europe, but they're a step closer. The type of card being rolled out in the U.S. will still need a signature when you pay for something. Eventually what will be used in the U.S. is what's used in the rest of the world, known as "chip and PIN." It would work similarly to your ATM card now. You would insert your card and enter a four-digit password to approve the transaction. Security experts believe this is a very safe way to pay for things. Signing for a credit card purchase provides near-zero security since signatures vary and are rarely checked.

WHAT COULD GO WRONG IN OCTOBER?

From a consumer perspective, there is little to worry about. The biggest issue is for the merchants, who are way behind replacing their equipment in time for the deadline.

10 Easy Ways to Simplify Your Life

   I'm grateful for the simple joys of life

We live in a world where modern lifestyles pull us in all directions. It’s no wonder we are overwhelmed and stressed out by our busy lives and cluttered homes.

UCLA researchers even wrote a book on the subject, “Life at Home in the Twenty-First Century: 32 Families Open Their Doors,” and found many families had garages too full to accommodate cars, backyards that are never used, and mothers with elevated stress hormones.

If you’re ready to step off the hamster wheel, here are some basic strategies to simplify your life.

1. Consolidate accounts

It’s hard to say no to the $100 bonus for opening a checking account when the new bank comes to town. Or maybe you can’t refuse the great sign-up offer available from the latest rewards credit card.

Before you know it, you could have a half-dozen accounts at various institutions. Your IRA is in one place, the checking account is in another. You also have a mortgage, emergency savings and insurance products to juggle.

Rather than having accounts scattered to the wind, try to consolidate them in a couple of places. Pick one bank for money and credit and one company for all insurance needs. In the end, you not only have fewer accounts to manage but also may get better rates or terms for bringing more of your business to a particular institution.

2. Purge the paperwork

Consolidating accounts is only the first step. Next, purge the paperwork.

Sign up for paperless statements, which most financial institutions offer. With the exception of a few vital documents such as birth certificates and titles, scan and shred almost everything else in your filing cabinet.

For more pointers, check out this article with five tips for paperless finances.

3. Pay cash whenever possible

Don’t underestimate the power of cash to simplify your finances.

Paying with cash can prevent you from overspending, and it eliminates much of the stress of daily money management. Never again will you have to worry about whether your card will be declined because the fuzzy math in your head isn’t quite right.

4. Automate your life

Free yourself from the anxiety of paying the mortgage on time by automating your finances.

If you’re not being paid via direct deposit, sign up. Some employers will let you split your paycheck among two or more accounts. If that’s possible, send at least 10 percent of earnings to your savings account.

Use a bill-pay service. Depending on your bank and billers, you may be able to request bills be electronically delivered, and the amount due paid automatically. Otherwise, you can set up recurring monthly payments.

For expense tracking, skip the spreadsheets and use an app or tracking software, such as our partner PowerWallet.

5. Stop buying more stuff

Minimalism is one of the core principles of simple living.

The less stuff you have, the less time you’ll spend maintaining, rearranging, and obsessing over what you’ve got. Plus, when you stop spending, you have more money for saving, or for splurging on important things.

6. Declutter what you have

As the UCLA researchers discovered, clutter can stress us. So focus on getting rid of the excess stuff you already own.

Before investing in yet another organizational system or storage unit, consider boxing items and shipping them to the thrift store or the landfill. Or, sell what you don’t need. After all, simplifying can be good for your wallet as well as your state of mind.

7. Cut loose toxic and high-needs people

When simplifying, don’t forget to look at the people around you.

Toxic personalities make lives difficult. They steal our good days and put demands on time and attention that could probably be put to better use elsewhere.

Consider how many times you’ve gotten off a phone call with a high-needs friend only to discover you’ve lost your mojo to get anything done for the rest of the day.

Do yourself a favor and cut off the emotional vampires feeding on your positive energy.

8. Reconsider your commitments

Juggling multiple activities is much more complex than focusing on one. Simplify your schedule by reconsidering everything on your calendar.

Ask yourself:

• Do I need to do this?
• Do I want to do this?
• Can I delegate this to someone else?
• What happens if this doesn’t get done?

We wear our busyness like a badge of honor, so saying no won’t come naturally at first. However, an uncluttered calendar is the key to a simple life.

9. Unplug at least once a week

At least once a week, put away all the electronics. Power down the computer put away the phone and turn off the TV. Spend time getting reacquainted with paper books, an old hobby, or your backyard.

Unplugging helps you slow down. Electronics tend to be “in your face” — loud, bright, and engaging. When they constantly surrounded you, it’s easy to lose track of time and start operating on autopilot.

Give yourself some quiet time to contemplate something more meaningful.

10. Create routines

Finally, a simple life thrives on routine. Without it, you may waste time and energy wondering what to do next.

Don’t confuse a routine with a schedule. A routine isn’t set in stone with time constraints. Rather, it’s a general idea of how your day will go.

A routine means knowing that you get up in the morning, have breakfast, load the dishwasher, and go for a walk. It could also be paying the bills on Monday, shopping on Tuesday, and doing your weekly dinner prep on Saturday.

Routines take the guesswork out of regular activities and make life simpler.

Source:http://www.moneytalksnews.com/10-simple-strategies-simplify-your-life/?all=1

7 Ways to Help Protect Your Financial Future From Unexpected Medical Expenses

Unexpected Medical Expenses

In life, anything can happen. Injuries and illnesses cannot always be prevented. But there are things you can do now to help protect your financial future from unexpected medical expenses and keep yourself happy and healthy in the process.

1. Start a Medical Emergency Fund

The time to set money aside for just-in-case scenarios is now. You never know what can happen and having savings set aside will give you comfort and peace of mind. Surprisingly, very few Americans save enough money for emergencies, unexpected job loss, or long-term disability. Of the people ages 18 to 29 that Bankrate.com recently surveyed, nearly half said they save 5% or less. Nearly one in five don't save anything at all. In a Cigna survey, individuals were asked how long their finances would last without a paycheck. 59% said they would exhaust their resources in 12 weeks or less. Almost a third (29%) said their finances would only last a month or less.

2. Keep That Emergency Fund for Emergencies Only

Okay, so you've created a cushion in your bank account. That's great! Almost as difficult as creating an emergency fund is keeping the money until you absolutely need it. Do not dip into it for frivolous purchases.

Think about what might happen if you come down with a serious illness or an injury. You need enough money in that account to cover your living expenses while you heal and recover, especially if you're unable to work.

3. Consider Disability Benefits

You might think this is an expense you can't afford, but protecting your income when you are sick or hurt and cannot work can be worth the cost. According to the National Safety Council, one in eight Americans seeks medical treatment for an accidental injury each year.^[i] And one in four twenty-somethings will become disabled before they retire.^[ii] These numbers are quite sobering. The median American salary is $53,000,^[iii] and a disability plan would typically cover 50%-60% of that income. And, don’t forget to look for value-added benefits available with many disability plans such as discounts on memberships to a local gym.

4. Understand Your Body's Signals

It's crucial to pay attention to how your body feels and reacts to things. You are the only person who can tell if something is off and when that's the case, call your doctor. Catching something in the early stages can save your life, and your budget. Some health plans offer access to telemedicine services. These services allow you to connect with a doctor remotely at any time of day. Emergency room visits can also cost a lot out of pocket, even with medical coverage. Before you get sick, scout out urgent care offices near you and save yourself a surprise medical expense later on. Of course, if you’re in a serious medical situation, don’t hesitate to call for an ambulance.

5. Lose the "I'm Invincible" Mentality

Just because you're young doesn't mean you're immune to health problems. A happy, successful future starts with taking care of yourself now. According to a recent study, sacrificing care for other household needs (food, rent, etc.) is especially prevalent among younger consumers. One-third of younger consumers make these types of tradeoff decisions occasionally, while one in four makes them at least once per month. Anything can happen, so make your health a priority. Poor health can be more difficult to fix as you get older.

6. Learn More About Preventive Medicine

When it comes to overall health, there are always improvements to be made. And even if you've been diagnosed with a certain condition or disease, there are things you can do to keep your health from worsening. The key is to educate yourself. Talk to your doctor about proactive ways you can improve your health. Check out available resources, professional organizations, and support groups through your health plan carrier or in your community. Don't be afraid to reach out. Each group has a vested interest in helping you with your health.

7. Live a Healthier Lifestyle

Good health and bad health are cyclical. A 2014 health study indicated that those in very good to excellent health tend to focus on exercise. Those in fair or poor health are more likely to establish bad habits like smoking. Bad habits cost more because they are gateways to other conditions. For example, obesity can lead to back and knee problems and even diabetes. So if you're obese or overweight, losing weight, eating healthy, and exercising consistently will help you stay on a healthy track. Staying healthy makes you happier now and in the future, and can help you keep more money in your wallet.

What steps have you taken to prevent a life-altering illness or injury from harming your financial future?

Source:http://www.wisebread.com/7-ways-to-help-protect-your-financial-future-from-unexpected-medical-expenses

4 Signs You Are Teaching Your Kids Bad Financial Habits

Teach your child about money matters

You spent that extra money in your bank account on a weekend trip to New York City, instead of using it to pay down your credit card debt. Maybe you even accidentally paid your power bill a week late last month.

Are you inadvertently teaching your teens' bad financial habits?

You might be.

It's not easy measuring how influential parents are when it comes to influencing their children's behaviors. Just ask parents who've tried to change a teen's mind on anything from fashion to dating to finding a job. But a 2014 study by Bank of New York — New Rules for Engagement — found that 52% of Millennials ranked their parents as their most trusted source of financial advice, while just 10% trusted the money advice of their peers.

"Maybe children don't trust their parents when it comes to picking friends, music, spouses, or even careers, but when it comes to financial advice, parents come out on top," says Kendrick Wakeman, founder, and chief executive officer of FinMason.

Because of this, parents have a special burden to pass good financial habits on to their kids. Wakeman says that ideally, parents do this by example — they save money, pay their bills on time, and don't run up their credit cards. Their children see this and do the same things when they're adults.

But what if you are far from the perfect financial role model for your children? What if you often forget to make your car loan payment on time? What if the debt on your credit cards grows every month? Might you be passing bad financial habits onto your kids?

Here are four signs that you are passing bad money habits onto your teens, and what to do about it.

Can't You Just Use Your Credit Card?

You're in the department store shopping for a flat-screen TV. There are models within your budget, models that you've saved up enough to buy with cash. But there's an even better TV that's outside your budget — far outside it. Your teens want it. When you tell them it's too expensive, they ask "Can't you just put it on the credit card?"

This is a sure sign that your children have watched you use your credit cards to buy items that you can't really afford. It's time to act like an adult and only make credit card purchases that you know you can pay off in full once your bill comes due. You want to teach your teens how to use credit cards wisely; using them to buy items that you can't afford is not how to do this.

Let's Get One More Thing

You're at the grocery store with your teens. You've checked off every item on your shopping list. But as you get nearer to the cashier, your teens start tossing packs of gum, magazines, or candy bars into your cart.

The odds are good they've learned how to impulse shop from you. You don't want your teens to grow up to be impulse shoppers. Those extra Milky Way bars and bottles of Diet Pepsi add up. Resist the urge to add them to your cart at the last minute. And make sure to stop your teens from adding them, too.

Can't We Just Buy This One?

You've decided to buy a new laptop for the family to use. Your teens are thrilled with this idea. Your plan is to do some comparison shopping, either online or at local electronics stores. Your teens, though, just want to buy the first laptop they find online, regardless of its price or reviews.

Look back at your own behavior. How many times have you simply gone online and ordered a new washing machine after a 10-minute online search? Have you gone to a car lot and simply picked the first car shown to you by the salesperson? If your teens have observed this behavior, the odds are high that you've taught them that comparison shopping doesn't matter. You can reverse this lesson, though. Next time you need to buy a new dishwasher, refrigerator, or other large items, take your kid's comparison shopping with you. They need to see just how much money you can save when you shop around.

Why Can't I Have It, Too?

Your daughter wants a new pair of expensive jeans because her friend at school has the same brand. Your son wants a new pair of gym shoes because his friend dropped $50 on the same pair.

It's likely that your teens have learned this why-can't-I-have-it-too behavior from you. Have you upgraded to a new car because your neighbor did the same? Have you purchased a swimming pool because you've seen your neighbors enjoying one? It's okay to buy these things if you can afford them. Teach your kids self-control — and help them avoid neighbor envy — by only upgrading to a new car when you're financially ready, no matter what your neighbors have parked in their driveway.

You Don't Need a Big Bank Account to Teach Good Habits

Debbie Crowder, branch banking executive vice president at Richmond, Virginia-based SunTrust Bank, said that parents, even if they are struggling with their own finances, can teach their children how to avoid their mistakes and become financially savvy adults.

"Involve your child in the day-to-day financial decisions you make for your household," Crowder says. "When the power bill is higher than usual, explain the reason why and discuss how the entire family can conserve energy the next month to lower the bill."

Chris Hogan, a financial speaker with Ramsey Personalities in Brentwood, Tennessee, says that parents can pass on good financial habits even if they themselves have a history of financial mistakes.

"The worst thing we can do as parents is to pretend like we're perfect," Hogan says. "It's important to talk about the mistakes we've made financially. That's what can make a real impact on our children's behavior."

How do you model good financial behaviors for your kids?

Source:http://www.wisebread.com/4-signs-you-are-teaching-your-kids-bad-financial-habits?ref=relatedbox

My 7 Investing Rules

Learn how to invest your money

Having investing rules is important as it is what keeps you from following the flock and making questionable moves. How often do you resist buying a hot stock? With some investing rules, you can avoid falling for hot tips or becoming emotional.

I will be the first to admit that it has taken me a few years to really sort out my rules. The goal is not to have a long list but to have some core rules that you cannot ignore when investing. It keeps you honest with your goals.

Investing Rules

1. Invest only in what I know and understand

Peter Lynch said it best if you cannot explain the business so that a child can understand it, then it’s probably too complicated. This mantra is the first filter I apply to the companies I put on my stock watch list.

2. Invest in companies that provide necessities

There are services or products in the world that we cannot live without, those are sustainable services with a consistent or growing demand. For example, financial services, oil & gas, food, utilities, and so on. You can rationalize that something is going to be needed even though it’s not an essential product or service to our lives and that’s fine but your core portfolio should have companies with essential and necessary products.

Once those sectors or necessities are identified, you can start focusing on the best picks. The strength behind this rule is that you can feel confident this company will be around due to the nature of their business.

3. Only invest in dividend-paying stocks

I have made it a focus that I want to be paid when markets go sideways and to that end, my investments must pay a dividend. It also means I can expect a minimum return on my investment while I wait for the stock to appreciate. When you apply this to your stock watchlist, you filter out another really large number of companies.

4. Focus on companies with an economic moat

I look for companies with an economic moat. More often than not, those are large companies. I tend to focus on medium and large-cap companies. Anything under $10B is a little small even if they are developing an economic moat. Companies with an established economic moat will often have grown to be large-cap companies. To that end, I look for an economic moat with a medium to large capitalization

5. DRIP everywhere

I want my money to work, so I let it re-invest itself. This rule will change in retirement but during my wealth accumulation period, I DRIP it all. It’s a form of compound growth. Many companies also offer a discount when you DRIP so you can take advantage of a price discount of 2%, 3%, or even 5% for some companies.

6. Diversify by sector

Diversifying by sectors allows you to add new money to underperforming sectors and take advantage of good buying opportunities. If your diversification is to buy 5 different banks, it’s not really much of diversification from a risk perspective because they are all in the same sector.

You’ll want to assess how much you want to allocate per sector and then start managing it that way. It makes choosing where to add new money an easy task as you want to try to keep the allocation you chose.

7. Limit the number of investments

I have set my number of companies to own and manage at 40. Any more than that and it’s too much to track. I am already there so if I intend to take a new position, I need to sell one. I am also at the point where I simply need to add more money to existing holdings. This number must really come from you and what works for you.

There is an obvious one that I have not added but it’s a hard one … Buy Low, Sell High. The reason I have not mentioned it is that it can be hard to always buy low since you cannot predict what the markets will do. If the market drops for whatever reasons, you can’t beat yourself over it. If you have cash, you can add more but I prefer to rely on my sector allocation to choose where to put my new money. To be a value investor is also quite hard. It’s not easy to identify a good price for a company as it most often trades on future earnings. IF this was easy, why would analysts get it wrong all the time ?!? For some companies, you sometimes have to buy near a 52-week high, that’s just how well those companies do.

Readers: Do you have a rule not listed you want to share?

Source: https://www.dividendearner.com/7-investing-rules/

Cashback Credit Cards - How They Actually Work And What You Need To Know

Cashback Credit Cards

As Singaporeans, we're an interesting species. When it comes to looking for good food or places to make out, we look online. But when it comes to our personal finances, like looking for the best credit cards, we ask our family and friends.

And the first thing your family and friends will say is, "Get a cashback credit card. You won't regret it." And you know what? As annoying as it sounds, they might be on to something there.

What is a cashback credit card?

A cashback credit card is basically one that earns you cash rebates whenever you use it. In "kiasu" Singapore, this is also known as a WIN-WIN situation.

It's like how "Shop N Save" became a household name in Singapore simply with the suggestion that you could save while spending. Never mind that the brand has since become absorbed by Giant. The fact remains that as a concept, it always makes sense to find ways to save money.

How does cashback work?

Every time you charge a cashback credit card, you earn cash rebates. These cash rebates are often put in a separate account so that you can redeem them at participating merchants or whenever it's convenient.

Say you get 5 percent cash back for dining on the new ANZ Optimum World MasterCard. If your meal is $100, that's $5 cashback.

Now, I must emphasise that cash rebates are not immediate discounts. You still need to be able to pay the full amount for your transaction first.

Let's use the example of the $100 meal with 5 percent cash back. It doesn't mean that only $95 gets charged to your card. If your available credit is $95 and you use your cash back credit card, your card will get declined because you can't afford the full amount.

How do you redeem your cash rebates?

There are so many different cashback systems available in the Singapore credit card market today. However, in general, this is how it works.

The cashback you earn each month is accumulated in a separate account. These rebates are then automatically used to offset your spending for the month, subject to several requirements, of course.

For example, the American Express True Cashback Card needs your account to be in good standing and not overdue before they give you your cashback rewards. The Citibank DIVIDEND Card only credits your account when you accumulate $50 worth of rebates.

The redemption of rebates is an extremely important factor to consider when deciding on a cashback card because if your lifestyle and expenditure aren't able to fulfil certain requirements then you're wasting an opportunity to save more.

What do you need to look out for when you choose a cashback credit card?

There are just two main questions you need to ask yourself when choosing a cashback credit card:

1. How much cashback can you earn?

This is often the most important question to ask. There's really no point getting a cashback credit card if it offers you a pathetic amount of rebates. As we pointed out before, you can use the POSB Everyday Card to pay your utility bill but does it really make sense if you only earn 1 percent cashback? That's only $1 a month.

Some cashback cards now offer 5 percent cash back and more on specific transactions. The OCBC FRANK Card, for example, offers an impressive 6 percent cash back on every online transaction.

2. How easy is it to earn cashback?

While it's important to know how much cashback you can earn, but you should not make your decision based on this question alone. You also need to find out exactly how many hoops you need to jump through to earn your rebates.

For example, the UOB One Card promises to give up to a 3.33 percent cash rebate on any transaction, even recurring payments. That alone should make it one of the highest cash rebates amounts on the market today.

What's the catch? Here are just three problems I have with cards like the UOB One Card (and there are certainly other cards with some similar requirements, but this is one good example).

Firstly, you need to spend at least $300 each month for three consecutive months. That means if you miss the minimum spending requirement of $300 for just one month, you don't get ANY cash rebates for three months.

Secondly, you have to make at least 3 purchases on the card each month, or you're not eligible for the rebates. Now, you might say, this should be easy to do, especially if you're making recurring payments for your phone bill or insurance. But the fact still remains that, if you're not careful, you could forfeit your rebates for three months.

Thirdly, the cash rebates you earn are "UP TO 3.33 percent". In reality, the cash rebates are tiered at fixed amounts of $30, $80, and $150 per quarter (depending on a minimum required spend of $300, $800, and $1500 per month respectively). Basically, you may not get a 3.33 percent cash rebate all the time.

Say you consistently spent $750 monthly on the UOB One Card, for example. This is less than the second tier minimum requirement of $800 per month.

What happens? You then only earn $30 for the quarter, or $10 a month in cashback, which equates to 1.33 percent a month. Quite a difference from the 3.33 percent advertised.

Compare this to cards like the ANZ Optimum World MasterCard, where you earn at least 1 percent cash rebate with no minimum spending and no cap on how much cash rebates you can earn. You earn a little less, yes, but you never need to worry about jumping through any hoops in terms of expenditure amounts.

Why should I choose a cashback credit card over other types of credit cards?

The short answer - to keep your life less complicated. Unlike rewards cards or air miles cards, you usually know exactly how much you're getting back with a cashback credit card. However, it ultimately depends on your lifestyle.

Take the example of those of you who travel regularly, for example, because your family lives overseas. It makes much more sense to get an air miles card and channel all your expenditure into earning frequent flyer miles so that you fly for free.

But if you're just looking to save while you shop, then getting a cashback credit card is for you. And then YOU can be the one annoying your family and friends with your stories of just how much your cashback credit card is saving for you.

One final thing you MUST note: as with the general principle of utilising credit cards, paying your bills on time is especially key for cashback cards.

Unfortunately, we will probably never live in a world where cash rebates compound as well. So pay your bills. In full, and on time.