Saturday, May 21, 2011

My favorite credit cards in Singapore

This post has been updated with a new post on the Standard Chartered XtraSaver Master debit card which allows me to maximize on my cash rebates using credit cards.

Credit cards have been denigrated as a financial evil. I used to have a friend who was a part-time financial adviser and he refused to own a credit card because of the harm done to some of his clients. Credit cards are not inherently evil. They are simply tools in our financial toolbox and if used properly, they can serve rather than harm us.

Credit cards are my favorite financial tool to help me save money. Here are some of my favorite cards in Singapore;

(Note to readers: I don't get paid for advertising these cards. Neither am I paid as an adviser for recommending these cards. So, please do your own homework and don't blame me if my recommendations do not suit you or I got my facts wrong. I only know they suit me well for my lifestyle. )

1. CIMB Platinum Master Card
The favorite feature that I look for in a credit card is cash rebates. It is like getting discounts on all your purchases with the card.

The CIMB Platinum Master Card offers 0.5% cash rebate on all local spending. It offers 1% cash rebate on all foreign spending with no monthly cap. This is useful for people who make purchases from overseas (recently, I made an online foreign purchase but there was no cashback. Is the 1% rebate still valid? Anyone who knows better?). Unlike some other cards, there are no monthly minimum expense to enjoy the full rebates.

The rebates are automatically deducted every month. You do not need to wait for points to be accumulated nor take the trouble to redeem the points.

Another great feature of this card is that there is no annual fee for life. You can save yourself the effort each year to call up the bank to waive off the annual fee as well as the risk of forgetting to do so and being charged the annual fee. I always assume that I will become unemployed eventually in some point of my life. Once the banks know you are unemployed, there is no guarantee that banks will waive off the annual fee because an unemployed person assumes a higher risk profile to the bank. Having a free-for-life card saves me that worry.

One reader told me about the UOB One card. The cashback rate is up to 3.33% but I am not sure if there is a minimum expense in order to enjoy the rebate. I do not own this card, so I better not comment further.

2. Standard Chartered Manhattan card (newly updated)
I just got this card a few weeks later after a kind reader alerted me to it. The cashback rate is better than the CIMB Platinum card - 0.5% for SGD1-SGD999, 1% for SGD1000-SGD2999 and 5% for SGD3000 and above on your monthly statement. The cashback is credited every 3 months. Given the superior cashback rate compared to CIMB card, it makes better sense to spend using this card.

Unlike the CIMB card, this card is not free for life. So, I will still keep the CIMB card as a backup in case the free annual subscription fee waiver is not granted. It is actually quite stupid to pay annual subscription fees on your credit card because all it takes to get a waiver is a phone call.

3. SMRT Citibank card
This card can be used like an ez-link card which we use for public transport. It gives you 2% rebate on each ez-link topup which is the same as shaving 2% off your public transport expense.

Please take note that you are charged SGD0.25 for every topup. Therefore, it makes sense to maximize the top-up amount (SGD50) to reduce the frequency of top-ups to save money.

Because of my thrifty lifestyle, I prefer cards that offer high rebates on basic unavoidable expenses to cards that focus on luxury spending. One helps us to save money, the other tempts us to spend money. It is a matter of lifestyle choice. Just spend if it makes you happy.

The SMRT card offers high rebates on grocery shopping which are necessary household spending. You can get good discounts from the major supermarkets in Singapore like Giant, Carrefour, selected NTUC outlets etc

So far, I cannot find another card with rebates that covers so many supermarkets. Another kind reader has pointed out that the Maybank Family and Friends card offers 5% rebate for some supermarkets as compared to the SMRT card which offers 4.7% unless you spend more than SGD600 per month. By combining both cards, we can get better deals at the supermarkets. 

4. POSB Everyday Card
I use the POSB Everyday Card to pay for my utilities bill which is an unavoidable basic expense. I get 1% off my utilities by using this card. This is the only card I found in Singapore that can be used to pay utilties bill. Again, if you know of a better card, please share.

5. Any cards that offer useful free gifts. Cash is best.
The rare occasions when retail customers can make money off the banks (and not the other way) is through credit cards. The banks dangle free gifts and sometimes even money to get people to sign on their cards. If the gift is useful one,  I will probably take the card. If cash is being offered, I will surely take the card. 

Recently, Citibank gave me a free USB speaker for my computer. Thank you, Citibank. Not to forget Maybank and Standard Chartered, thank you very much for your free cash. 

This finishes the list of my favorite cards. There may be better credit cards out there. I can't know all of them and new cards keep springing up. Please share if you have good recommendations that I have missed out. 

Credit cards can be a good financial friend. Just don't owe money on your credit card but if you do, the top financial priority should be to pay them off. NEVER ROLL OVER YOUR CREDIT CARD DEBTS. Nobody can be rich if they have to carry debt at 20% compounded. Even a small amount can kill.

Saturday, May 14, 2011

Choosing a broker for trading Singapore stocks

Latest update: This post has been obsoleted by a new kid on the block. Standard chartered online trading brokerage has stormed into the Singapore brokerage industry with a whole new pricing. Here is my update.

One of the favorite questions asked by newbies to the stock market in Singapore is "who should I use as my broker"?

This is what I did for myself. I use DBS cash-upfront account primarily for buying Singapore stocks. The price comparison is compelling. DBS cash-upfront charges 0.18% of invested amount or minimum SGD18. This is way cheaper than (0.275% or minimum SGD25) charged by the rest. DBS cash-upfront is 35% cheaper than all the other brokers. 

Why so much cheaper? Where is the catch? The key lies in being cash-upfront. You have to deposit cash upfront into an account with DBS Vickers to buy stocks. DBS Vickers is able to charge lower commission rates because the risk of customer not paying up for his share purchases is zero.

Please note that you cannot buy on contra (buy now, pay 3 days later. Uniquely Singapore) with cash-upfront. That is the catch. However, I hardly think this is a disadvantage. So far, I have never seen a consistent winner in the Singapore stock market using contra. Conversely, I have encountered and read about several market participants getting burnt using contra. It is hard enough to be a market timer. To get your timing right to an accuracy of 3 days is even harder. It is possible to make good profits in one or two occasions using contra. Who doesn't have luck on his side sometimes? But to be profitable consistently by playing contra? I think you will have better chance of getting rich by working hard at your day job.

After shares have been deposited into your CDP(Central Depository) account which occurs 3 days after purchase, they cannot be sold using the cash-upfront account (they can still be sold within 3 days using cash-upfront). So, for the sale of shares, you are free to use other brokers but will have to incur the higher commission rates of 0.275%. If you are a big customer, you can pressure your existing broker to charge you cheaper rates by using the cheaper cash-upfront rates to bolster your bargaining position. Congratulations if you are successful. However, please be very careful when you are using one broker for buying and another broker for selling. It is easy to become confused during periods of active trading and you may accidentally do a naked short-sell. The penalties for naked short-selling in Singapore is hefty. In the worst case, it can be a minimum of SGD1000 or 5% of trading value.

I have accounts with several brokers. This is because of the bad experience with the inadequate reliability of the online trading platform of Singapore brokers, especially on days when trading volume is high. By having several brokers, if you cannot log in on one particular online account, you can still try the others.

Having said that, it is best to keep your trades to one broker, at most two. The buy/sell limits granted by the Singapore broker depends on the volume business he gets from you. If you need more firepower, you have to fire more shots using the same broker.

By using one broker exclusively, you can use that broker to track your portfolio accurately and keep good trading records. A good online platform should update the portfolio automatically. Trading records are vital to traders who want to become good traders. I doubt if any experienced traders reading this post will disagree with that.

Sunday, May 1, 2011

Fears of a new Black Swan in Singapore General Election 2011

In my previous post, I wrote about fears of a black swan event in the coming election. It is PAP losing power to an opposition which is still not ready to take over the reins. Admittedly, those fears were borne out of selfish reasons. I was afraid of losing lots of money from the adverse market reaction if PAP was thrown out of power on 7 May 2011.

Now, I have fears of a new black swan. It is the opposition losing all its seats in parliament.

It is amazing that the opposition has attracted high-quality candidates despite offering little or no money and plenty of risks. Look at what happened to some of the past opposition candidates and it is hard not to be fearful if you are an opposition candidate. By joining opposition, they have more to lose than gain. Otherwise, why do so many opposition candidates face family opposition to join the opposition?

If these people have the courage to take on the risks and make the sacrifices to stand up for the country for their beliefs, what kind of message are Singaporeans sending if they lose all seats in parliament this time? Will any more credible opposition candidates dare to stand up for us the next time?

It is not healthy for any entity, whether it is a business or government, to be a total monopoly. Freedom from competition will lead to complacency. Some competition will keep them on their toes and open their ears to the customers.

I hope none of the black swans feared will materialize. A middle ground will be the optimum outcome.