A corporate credit card is the most convenient way to pay for business expenses and receive payments from customers. In Singapore, credit cards were the payment solution of choice for e-commerce transactions (42%) in 2022, according to the FIS Global Payments Report 2023. As a business owner, let’s say you have an urgent purchase to make. Your corporate credit card allows you to do just that and gives you a 30-day window to pay back your debt. Easy, right? Yes, but only if you know all about the fees – upfront and hidden – that go with owning a credit card.
You might know that credit card late charges are levied on delayed payments, but did you know that a single transaction on your corporate card can attract more than one credit card processing fee? This article explains all the corporate credit card fees you might or might not be aware of.
A credit card is issued by banks and other financial institutions and allows you to pay for goods and services offline or online on credit up to a specified limit. The condition is that you must pay the borrowed amount along with any applicable interest and other agreed upon credit card charges in full by the due date or over a longer period of time. Apart from the power to buy on credit, credit cards also allow you to withdraw cash, again for a fee.
Credit cards suited for individuals are called personal credit cards while those geared towards businesses are called corporate credit cards. This article deals with the latter.
Using your credit card responsibly by making timely payments helps you build a strong credit score, potentially allowing you to increase your credit limit and be upgraded to a better corporate credit card with better benefits and perks.
Credit cards allow you to pay a minimum amount by the due date if you cannot pay the full balance of what you have borrowed. This is called minimum monthly repayment. This feature sets credit cards apart from charge cards, which demand payment in full by the due date (which is usually the end of the month). Most banks calculate the monthly minimum amount for credit cards at 3% of the balance amount or SGD 50, whichever is greater, plus any outstanding balance you owe the bank from the previous statement period.
Failure to pay the minimum amount for two months in a row can get your credit lines suspended, so you can no longer buy what you need on your credit card. Furthermore, being late on payments affects your credit score negatively, which can hamper future efforts to secure loans and funds for your growing business.
These are the 12 credit card charges you might or might not have heard of. What’s important is to understand how each one works so as to keep your debt under control:
1. Annual fee
The credit card charge most card holders are familiar with is the annual fee, which is a recurring fee that is charged every year. In Singapore, the annual fee for corporate credit cards usually ranges from SGD 100 to SGD 300, with higher fees associated with premium cards. Most banks and card providers will waive off the fee for the first year or two. However, you can absolutely get a credit card with no annual fees. You just need to ask your bank if they offer this option or find another that can give you a fee waiver. Getting a corporate credit card with no annual fees is a big advantage as you’ll already be contending with many more credit card processing fees you just cannot avoid.
2. Late payment fee
Your bank will charge a late payment fee if they do not receive the minimum monthly repayment by the due date. Most credit card late charges in Singapore are a flat SGD 100, but in the case of some banks and credit card providers, it can be a percentage of the minimum monthly repayment amount.
3. Finance / interest charge
Credit cards charge interest on the transaction amount if it is not paid back in full by the due date. This interest charge – also called finance charge – is levied on a daily basis and is effective from the date of the transaction till the date the debt is fully repaid. If the amount is repaid in full on or before the due date, no finance charge is imposed. If only the minimum amount is paid, interest is charged on the balance amount that rolls over to the next billing cycle. Finance charges on credit cards in Singapore range between 20% and 30%.
4. International transaction fee
Credit cards have made it easier to make purchases abroad and on foreign websites. But such convenience comes at a price. An international transaction fee – also called a foreign transaction fee or overseas transaction charge – comes into effect when you transact in a foreign currency using your credit card. In Singapore, foreign currency transactions are first converted into US dollars and then into Singapore dollars. The conversion rate used is either the wholesale interbank rate or government-mandated rate, which is decided by the respective card network (Visa, Mastercard, American Express, etc).
Apart from the foreign exchange rate determined by the card network, the international transaction fee has two more components – a currency conversion charge collected by the card network and an administrative fee charged by the credit card-issuing bank. Card networks also charge an administrative fee (around 1%) on transactions in Singapore dollars if done abroad, including on foreign shopping sites and mobile applications.
In Singapore, bank credit card overseas charges are usually in the vicinity of 2.5% to 3.5%, although some fintech companies offering corporate card services have more competitive rates.
5. Cash advance fee
Many credit cards come with the facility of ATM cash withdrawals, subject to minimum and maximum daily limits. However, the charges on such ATM withdrawals are a lot steeper than if you were using your debit card or ATM card. Many major Singapore banks charge a cash advance fee (e.g. 8% of the withdrawal amount or SGD 15, whichever is higher). But that’s not all. Finance charges that can go up to as high as 30% are also imposed on the withdrawal amount, calculated on a daily basis from the day of the transaction till the day the amount is repaid in full. Again, many non-bank financial institutions that offer corporate credit cards have much lower cash advance fees or none at all.
6. Cash withdrawal fee at overseas ATMs
Similarly, using your Singapore corporate credit card to withdraw cash from an ATM in a foreign country will invite a credit card transaction fee. Most banks charge a flat withdrawal fee plus administrative or processing charges. Some might charge just the processing fee and not the withdrawal fee.
One way of saving on this expense is by looking for an ATM of the bank with which you have a credit card. However, this is easier said than done if your bank does not have a presence in a particular country.
7. Card replacement fee
It’s not uncommon to lose or misplace your credit card. But that might cost you as well. Most banks and credit card providers will replace your lost or stolen credit card for free the first or second time and charge you only from the third replacement onwards. Others might charge a card replacement fee right away.
If your credit card is lost or stolen, it’s important to have it blocked immediately by getting in touch with the bank. This is because the banks will hold you liable for any unauthorised transactions if they have not been immediately notified.
8. Balance transfer fee
Did you know that you could transfer the outstanding balance on one credit card to another credit card with a lower or zero interest rate? A balance transfer works in much the same way as a personal loan repayment. However, the repayment period is shorter. In Singapore, it ranges from three months to 18 months. And, you can choose to pay a minimum amount each month, on the condition that you will pay back the entire amount by the end of the repayment period. If you decide to go in for a balance transfer, you will incur a one-time credit card processing fee of up to 5%. However, your costs could go up if you fail to make your monthly minimum payments as this will attract late payment fees as well as credit card finance charges.
9. Over-the-limit fee
Credit cards come with credit limits. If your outstanding balance exceeds your credit limit, you will incur an over-the-limit fee, which is usually SGD 40-50 or a percentage of the balance amount (this varies from bank to bank).
Although credit card providers decline a transaction if it goes over the credit limit, over-the-limit situations can still occur from time to time. It might happen if a temporary credit limit increase expires and your outstanding balance at that time is higher than your original credit limit. Or, it can happen when the credit card transaction fees (such as cash advance fees, credit card overseas charges) levied by your bank take your balance beyond the credit limit.
10. Returned payment fee
If you schedule payment of your credit card bill but don’t have enough money in your bank account, then payment will be returned and you will incur a returned payment fee.
11. Miles conversion fee
Quite a few Singapore credit cards allow you to convert your reward points into air miles and even hotel loyalty points. Not all of them charge you for this, but some do. Most banks charge a miles conversion fee each time you convert your reward points. However, some offer an annual option where you pay once for unlimited miles conversions for a 12-month period. If you have a UOB credit card, for example, you will be charged SGD 25 for a one-time conversion or an SGD 50 annual conversion fee.
12. Merchant fees
You pay credit card fees not only to use a credit card but also to accept payment via credit card. The latter charge is called a merchant fee. There are two types of merchant fees for accepting credit card payments:
Does it make a difference when you use a corporate credit card instead of your personal credit card to pay for your business expenses or receive payments from clients? You might have been told that after incorporating your company in Singapore, the next step is to open a business account and get yourself a corporate credit card. There are multiple reasons why having a corporate credit card is good business practice:
Corporate credit card fees aren’t that different from personal credit card fees. For example, the annual fees for three major corporate credit cards – as listed in our article ‘The Best Corporate Cards in Singapore For Your Business’ – are similar to what most major personal credit cards charge. While it is true that some corporate credit card programmes are more expensive than personal credit cards on account of having more card users, it is also true that you can get highly affordable corporate credit cards in Singapore, such as those geared towards small businesses and start-ups.
2. Spend limits
With a good corporate credit card programme, a company can have as many credit cards as it needs for its key employees. Furthermore, it can set spend limits for each card and restrict transactions to specific suppliers, merchants, locations, and so on. This means greater control over the way company money is spent and real-time visibility over where the money is going, which makes for more efficient spend management.
3. Employee benefits
Corporate credit cards save employees the trouble of paying out of their pockets, waiting to be reimbursed, and doing unnecessary paperwork. They can also submit their expense reports easily without the risk of errors creeping in.
4. Rewards and perks
Corporate credit cards offer rewards tailor-made for company executives, such as air miles, frequent flyer points, travel benefits such as free access to hotels and restaurants, and even cashback. Personal credit card reward programmes are usually not able to match this.
5. Setting boundaries
Using a corporate credit card allows you to separate your business and personal expenses. If you use your personal card, you’ll have to do the extra work of documenting your business expenses. With corporate credit cards, it’s easier to track your expenses, assign accountability, and manage your accounts, especially because many cards offer seamless integration with your accounting software.
The Aspire Corporate Card is a virtual, multi-currency debit card powered by Visa. It’s great for business as it offers as many virtual cards as you need, allows you to set spend limits so you always stick to your budget, keeps all your transactions in one place for easy access and viewing, and integrates with your accounting software. You can also get a physical card if you want one. Other winning features of the Aspire Corporate Card include foreign exchange rates two times cheaper than what banks offer and 1% cashback on digital spend. Its affordability and excellent features make it a popular choice for small businesses and start-ups.