Written on: 22/04/2025. Estimated 5-10mins read

Ah yes credit cards, some love it, some hate it, some just don’t get why should they use it.

Here’s where we cover the basics of how credit cards actually work, how they differ from debit cards, and expand on what are miles and cashback and which you should go for to suit your needs.

What is a credit card? How does it differ from a debit card

Picture this, you’re getting a coffee, it costs $5. Here’s how using a debit and credit card to pay for it differs.

When you use a debit card, that $5 is deducted almost immediately from the bank account that debit card is linked to.

When you use a credit card, that $5 is deducted from the bank first, then billed to you at the end of the month. ****

Essentially, a credit card acts as a borrowing tool. When you use one, you’re essentially spending the bank’s money, and paying it back later.

You must be wondering...since I am ultimately spending my money, why go through the hassle of paying later and potentially risk incurring extra interest?

So why use one?

• Build your credit score: Using a credit card responsibly helps build your credit score, a factor that banks/creditors consider when it comes to future loan approvals (e.g. your first BTO or car loan).
• Earn rewards: Every dollar you spend can earn you cashback or miles that can be redeemed for flights, hotels, or vouchers.
• Perks: Many cards offer benefits like complimentary travel insurance, airport lounge access or dining discounts.
• Fraud Protection: If someone steals your card or card details and uses it, you won’t be charged for it, once reported promptly.

Miles and Cashback: What are they?

Let’s break down the two most common reward structures in Singapore.

Option 1: Cashback💰

Cashback cards return a percentage of your spending either in cold, hard cash OR as a statement credit to offset your credit card bill.