Singapore is a predominantly cashless society and leading data analytics firm GlobalData predicts the country’s card payments market will touch SGD 136.8 billion this year (up 12.8% from 2022). Like individuals, Singapore businesses have a strong preference for plastic. And while credit cards are arguably the most popular card, the use of debit cards and charge cards is also on the rise. Credit cards and charge cards made up 62.4% of all card payments in Singapore in 2022 with debit cards accounting for the remaining 37.6%.
By explaining the differences between debit cards and charge cards and how they work, this article aims to help you make informed choices about your corporate payment methods.
A charge card is often confused with a credit card but the two are not the same.
A charge card does work like a credit card as it allows you to make a purchase on credit. However, you must pay for the purchase in full by a stipulated time, which is usually by the end of the month. Some charge cards might give you the option of making payments over time, but this is not the norm and you will have to check with your card provider for this. In contrast, a credit card allows you to pay a minimum amount at the end of the grace period (usually 25 days) and carry the balance forward until your next credit card statement and payment due date arrive. The credit card provider charges an interest on the balance amount. Because a charge card requires payment in full at the end of the month, it does not charge interest like a credit card.
Also, unlike a credit card with a set credit limit, a charge card has no preset spending limit. This does not mean that you have an endless line of credit to pay for your business needs. It simply means that the charge card provider adjusts your spending limit every month based on your spending and payment history, credit record, and business finances.
What a charge card and credit card do have in common is that both incur a late fee if you fail to pay by the due date. This might even get your charge card deactivated.
A debit card is linked to your bank account and allows you to make purchases by drawing on funds you already have. Whenever you open a personal account or a business account, the bank or financial institution will provide you with a linked debit card.
When company executives make purchases on their corporate debit cards, the amount is instantly deducted from the linked business account. Unlike a charge card or credit card, a debit card is not a credit instrument. This means that it does not invite interest charges. However, a debit card allows you to buy only what can be covered by the funds in your account. Or, even if you succeed in making a purchase for which the funds in your account are insufficient, you will incur an overdraft fee (a bank charge when you spend more than you have).
You can use your personal or corporate debit card to buy items, pay bills, and withdraw cash at ATMs.
Most financial institutions will give you a charge card only if you have an excellent credit score. You might have to undergo a credit check before your card application is approved. As a major charge card provider, American Express has strict eligibility criteria. To qualify for the Amex Platinum Charge Card, a personal charge card, you must be 21 years of age or older, meet its minimum income requirement, and pass its internal assessment. Similarly, to receive a Diners Club charge card, also a personal card, you must be a) between 21 and 65 years of age, b) a Singaporean, Permanent Resident, or Employment Pass holder, and c) earn between SGD 15,000 and SGD 60,000 in a year. Eligibility criteria for corporate charge cards, such as the DBS Corporate Charge Card and the Amex Corporate Gold Card, might differ.
It is comparatively easier to own a debit card. All you need is a bank account (savings or checking, personal or business) and the bank/financial institution will provide you with a linked debit card. And as a debit card is not a credit instrument, most institutions do not conduct a credit check of their customers.
Charge cards are the outright winner in this category. They offer premium and exclusive benefits such as welcome bonuses, travel and dining perks (free access to airport lounges, free hotel room upgrades, etc), and reward points if you spend beyond a specific limit. The Amex Platinum Charge Card offers complimentary hotel stay, spa treats, free access to top restaurants, clubs, and golf greens, and more. And with the Amex Corporate Gold Card, you’ll get reward points for foreign transactions and insurance coverage for business travel accidents, overseas medical expenses, and lost or stolen luggage among others.
In contrast, debit cards do have rewards programmes but on a more modest scale. Most cards offer a small cashback on purchases up to a certain amount.
Debit cards are known to have fewer protections than charge cards. If a debit card holder falls victim to fraud, there is a chance that their bank account might lose a considerable sum of money or, worse, be emptied. There is no chance of this happening with a charge card. Also, most banks offer limited protection on lost or stolen debit cards. The card holder is not held liable for unauthorised transactions only if the bank has been notified of the loss or theft of the card immediately. If they fail to notify the bank on time, they will have a hard time getting their stolen money back.
In contrast, charge cards offer protection not only against theft but also damage. American Express’ ‘Purchase Protection’, for example, provides insurance for the theft or accidental damage of items bought on its Platinum Card within 90 days of the purchase, subject to certain conditions.
The choice boils down to your needs. A small business that cannot afford an extravagant annual card fee, has no large purchases to make, wants to remain debt-free, and has no need for fancy travel and lifestyle benefits might be happier with a debit card. But a charge card might be the answer if you’re looking to expand your business, have the finances to meet the minimum income requirement, and want greater fraud protection.
A frequent entry in the ranks of best debit cards in Singapore, Aspire’s Corporate Card is a virtual, multi-currency debit card powered by Visa. The Aspire Corporate Card doesn’t charge for card activation or transactions and has no minimum balance requirement. It boasts of some of the lowest foreign exchange rates in the market and even offers 1% cashback on digital spend, which is promptly deposited in your Aspire Business Account. What’s more, you can have unlimited virtual cards and customise the spend limit on each one, making it the ideal payment solution for your company.