Now that you’ve been armed with a solid introduction into credit cards and know what their main purpose is (delayed payment), what happens if/when you pay off your bill partially or in full or not at all (potential interest and/or penalty fees), what the difference is between your statement date and your due date (…please see previous post…), how credit cards earn the banks loads and loads of money (they delude you into a false sense of comfort and encourage you to make minimum payments so they earn maximum interest), how you could lose loads and loads of money without really realizing it (getting deluded into a false sense of comfort where you make minimum payments and pay maximum interest), etc.
You also now know that all the banks in Brunei offer pretty much the same credit card rates and fees – 18% interest per annum (which is repackaged and advertised into the much more palatable and misleading “1.5% per month” rate), with an 8% minimum payment. Since Bruneians are preferential towards Islamic banking nowadays, Baiduri and Standard Chartered call the 18% a “finance charge” and BIBD does an even more roundabout calculation involving Admin fees and ‘Ibra (discretionary rebate) but as a consumer all you need to know is whatever fancy name the bank calls it, you have to cough up 18% per annum if you’re not prompt with your bill.
With all that out of the way, the main message I urge you to understand is that banks want you to use your credit card because any single time you fail to clear your bill before the end of the month, it’s profitable for them. They’re not providing this service to you as a favour; they’re not being compassionate and kindhearted by allowing you to delay your payments. Banks are commercial, for-profit institutions; they’re a business and profitability lies at the very core of any business. So in order to boost profitability, banks will encourage you to use your credit card more. Even if you start off disciplined and responsible, with the knowledge that credit cards are mini-loans that don’t represent an extension of your spending ability, they want to tempt you down the slippery slope, to seduce you into replacing your cash transactions with credit in the hopes that one day you’ll get complacent, absent-minded, and careless and forget to pay your bill before it’s due. And every single time this happens, the bank earns a little bit of money. Unfortunately for us (and fortunately for the banks), this tends to happens a lot of the time because the subject of credit card debt has been stripped of its fine print and completely normalized.
What I mean when I say that is: the idea of having debt and, specifically, the concept of having an unpaid, outstanding balance on your credit card which you push from month to month has been cloaked, veiled, and painted to look perfectly normal. There’s very little stigma and shame associated with this because we’ve created a society in Brunei (and well, most parts of the developed world) where debt, loans, and credit card balances are all viewed as a normal part of life: if you’re an adult, you probably have utang – and if you don’t, you probably should.
In Brunei, the euphamism (i.e. “nice word”) for having lots of debt is “oh, aku ada banyak commitment.” And the image this phrase inevitably plants in your mind is, ho boy this guy’s a solid bloke – he’s probably done the responsible adult thing and settled down; now he has a wife and child to pay for and you definitely need loans for that type of thing.
Ok enough emotional blackmail for the time being; back to the banks!
When you sign up for your credit card and fill out the little application form, the default option is either manual payment (i.e. the responsibility of payment is all on you and if you’re late by even a day, you’re slapped with a penalty) or direct debit of the minimum payment (i.e. 8% will automatically get transferred over from your general account). I signed up for a credit card three years ago, I was fresh off the student boat and only a month or two into work (if i brought my pet rabbit i bet they would’ve offered him one too); I vaguely recall 50% and 100% also being options, but they certainly were not the first check-boxes at the top of the list. Furthermore, y’know we live in a world of automatic e-mails, instant messaging, and cash deposits that immediately register in your accounts. But even at this technological frontier, credit card payments “will only be credited the next day” (!!) which bloody well means if your deadline is the 4th of July, and you pay on the 4th of July, you’ll still get slapped with a penalty because the payment will only kick in the next day -_-
Do you see how the banks want you to slip up? This isn’t a conspiracy theory, this is just smart business that bets on consumers being dumber than a box of rocks. And the banks are on the winning side of this bet, that’s what the real shame is. We need to stay educated, people! Read the fine print, take responsibility and ownership over your own matters, and stop blaming the banks and shops and government for yo’ brokeass self! Chances are you have no idea what real poverty and kesusahan feels like, you’re probably just mismanaging your funds. (Disclaimer: I don’t claim to know what real poverty feels like but well I ain’t blamin’ nobody for not having my million dollar mansion yet.)
(Except myself. Sigh.)
Anyway. Like I said, banks want to encourage you to use your credit cards more. Their motives for this should be pretty clear by now so let’s look a little deeper into how they go about doing this:
They’ll reward you, of course! Tempt you with treats and “for a limited time only!!” deals in the form of rewards programs or discounts.
Credit card rewards programs generally operate around a simple premise: The more you spend on your credit card, the more you earn “rewards points”; and you can use your rewards points to redeem things like air miles, cashback, or donations to local charities. BIBD calls theirs Hadiah Points, HSBC and Standard Chartered calls them Reward points, Baiduri has the extremely long-winded “Bonus Points which are then converted to Baiduri $ which can then be transferred to an Instant Rewards Card“. Click on the links for more details on the respective banks’ site.
Credit card discounts are more straightforward. You’ll gain access to discounts or offers at participating stores and retailers if you make the payment with your credit card. For example, you get 20% off if you spend over $20 at Ximply Chriz and pay with your BIBD card.
It’s worth noting that these rewards programs and discounts are often also available with debit cards, but the discounts are usually higher and rewards better with credit cards. So for instance, the debut of FashionValet’s pop-up store at Empire last month was open exclusively to Standard Chartered credit card holders and invited guests only. (It was open to public after but the obvious perk is that Standard Chartered credit cardholders got first pick.)
I explained in an earlier post that I quite enjoy having cards with more than one bank because it allows me to take advantage of more dining discounts, which is useful especially since I spend so much money on food and drink. Similarly, the rewards program is actually the main reason I charge expenses onto my credit card; I do this to accumulate rewards points which I then redeem for Royal Skies miles.
I’m not going to meticulously detail out and compare all of the perks across the banks because there’s such a huge variety; if you’re interested in more details I encourage you to click the links to the respective banks above. But in general, the credit card rewards programs allow you to redeem your points for:
- annual card fee waivers (BIBD and SCB)
- cashback (BIBD and essentially what the Baiduri Instant Rewards Card operates as)
- Royal Skies miles (all banks)
- Kris Flyer miles (not sure about this, you’ll have to check)
- Charitable contributions (BIBD and SCB)
Since I’m mainly interested in the Royal Skies miles, here’s a comparison of their redemption programs across all the banks:
**Not gonna lie, Baiduri’s Instant Rewards Card system was too complicated and I couldn’t find the Royal Skies redemption details on the website so I gave up. Step up yo game, Baiduri!
I only have an HSBC credit (and debit) card and a BIBD debit card that doesn’t seem to earn Hadiah Points (perhaps it’s not automatic and I need to sign up for it? I’m not sure) and like I said above, I collect points on my HSBC credit card solely for the purpose of redeeming Royal Skies miles. According to the table, HSBC currently has the best/cheapest “dollar spent per mile” conversion rate, so yay!
Considering I pay off my credit card in full every month and have never made an interest payment, all the points I accumulate don’t cost me anything, and will also be converted into Royal Skies miles for free. I’ve redeemed “free” flight tickets on Royal Brunei at least twice in the last few years, which is pretty darn awesome. But do note that flight redemption doesn’t include airport tax and surcharges, so my “free” tickets cost me around $100-$150 each, if I recall correctly. Still, the usual price of tickets is in the $300+ range anyway so my “free miles” did give me a hefty discount.
Disclaimer: It helps that I travel for work sometimes (a couple of years ago this was very frequent) and I tend to operate on a “pay first, claim from office later” system. So I end up charging the hotel fees, etc. onto my credit card (which will earn me points) but I don’t actually end up “spending” anything because obviously the cost will eventually be fully reimbursed by my employer.
Nevertheless, with HSBC’s winding down process in full gear, I’ll eventually be scouting the other banks to decide where I should transfer my main accounts to (i.e. my general account for salary purposes and my credit card).
One way to make this decision is, of course, to take a look at the savings accounts and compare the rates on offer. Although it’s worth keeping in mind that you can easily open up a savings account in any bank without signing over your salary, so perhaps this is a secondary consideration. In fact, the decision on which bank to assign your salary to has the greatest bearing on where you’re able to obtain financing in the form of credit cards and loans. So a key consideration you should look into are credit card rates (if you’re interested in a credit card) and the associated discounts and reward programs. However, I don’t think you should ever base your decision solely on the rewards; these are just a supplementary bonus and shouldn’t inform your overall decision, especially since the deals rotate and change so frequently. I encourage you to look into financing options and loans also, especially if you foresee yourself needing a major loan (e.g. house, education) in the near future. I haven’t done a comparison on that but perhaps I will one day. And the final thing to think about is accessibility – where are the bank branches and are ATMs conveniently located near you, your workplace, and the areas you frequent?
There’s no real “best bank in Brunei”, despite all the annual awards and recognition the local banks like to tout and flaunt about. It really does depend on your own needs and preferences, and what will suit your own personal financial situation best.
It just crossed my mind to mention this final disclaimer: No, I don’t work for a bank, nor am I (or any of my direct family members) affiliated with any of the banks or financial institutions 😛 So my opinions are as objective as they can be and they’re made purely from a consumer’s standpoint based on my personal experience and the information I’ve managed to get from the banks websites.