Pros & Cons: Credit Cards vs Cash

Using credit cards locally in Singapore

Pros

1. No need for ATM withdrawals
2. No additional fees (unlike overseas usage)
3. Depending on your valuation of a mile, you will get about 7% value back from your spending
4. Ability to track your spending through card statements
5. Take advantage of special bank promotions

Cons

1. Missing the bill payment due date
2. Over-spending as impulse spending becomes easier

Using credit cards overseas

Pros

1. No need to visit the money changer and ‘survey’ for the best rates
2. Security. Carrying a credit card around is safer than carrying large amounts of cash
3. Depending on your valuation of a mile, you will get about 3.5% value back from your spending after deducting the ‘cost’ of foreign transaction fees of about 3.5%
4. Ability to track your spending through card statements
5. Take advantage of special bank promotions

Cons

1. Missing the bill payment due date
2. Over-spending as impulse-buying becomes more convenient
3. With a foreign transaction fee of about 3.5%, all your spending will cost that much more

Unless if you have serious money management problems, credit card is the clear winner for local spending. The key disadvantage of using credit cards overseas is spending that 3% more than what you would have with cash. Here is an example:

Jess and Ann bought a dress in Bangkok that costed THB 2,200. Jess paid the exact amount in cash. This happened to be what she got from the money changer when she exchanged SGD 100. In other words, Jess paid SGD 100 for that dress. On the other hand, Ann decided to use the OCBC 90°N for this purchase. She would see SGD 103 charged to her card as the bank have included the 3% foreign transaction fee. She would also notice that she received 412 miles (worth SGD 7) from this purchase.

Conclusion

By using a credit card overseas, what you are doing is essentially ‘buying’ miles at around $0.007 each. As this is way below my valuation of a mile of $0.017, I choose to use credit cards for overseas spending. As mentioned above, I get 7% value from the 3.5% extra that I am spending. Even if you choose to use credit cards overseas, you should carry some cash for certain situations. I wrote about these situations in this article.