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Traditionally, many people believe that purchasing items on credit is a sign of financial irresponsibility. The reasoning is simple: if you can afford to pay for something in full, why choose to borrow money to make the purchase? However, in today’s world, many of our purchases are actually a form of borrowing, even if we don’t immediately realise it. Take credit card payments, for example. When we use credit cards, banks pay the merchants on our behalf, and we repay the bank later, ideally in full, when we receive our credit card bill. Essentially, we are using short-term credit borrowed from the bank to make the payment for our purchases. Most credit card users are financially responsible. They opt to use credit cards not because they can’t afford what they are paying for, but because of the convenience and benefits the cards offer them. Other forms of borrowing include credit card instalment plans and Buy Now Pay Later (BNPL) services. Similar to credit cards, these options allow consumers to purchase products today, and to pay off the full bill at a later date. In a recent on financial behaviour among young Singaporeans, released in April 2024, it was found that nearly seven in ten young Singaporeans have used Buy Now Pay Later (BNPL) services. Contrary to the popular belief that lower-income earners would be the primary users of BNPL services because it helps them afford items they otherwise couldn’t, the survey revealed that higher-income earners are actually more likely to use these schemes. also suggest that such services may be used to provide payment flexibility to users, as opposed to just being a means to afford something expensive that the user can’t actually afford. This popular quote is frequently used to describe the time value of money. The concept is straightforward: money today is more valuable than the same amount in the future. There are two main reasons for this. The first reason is inflation. As prices rise over time, the purchasing power of money decreases. For example, consider what $2 could buy twenty years ago compared to today. The second reason is the potential for earning returns on today’s money. If we have $10,000 in a savings account earning 3% per annum (or 0.25% per month), we earn $25 in interest each month. This means that if we can defer the payment of a $10,000 purchase by one month, we would earn an extra $25 in interest. While this amount might seem small, the principle remains: a dollar today is worth more than a dollar in the future. By investing today’s money and deferring payment for the purchases made, we can actually improve our financial position. Instead of paying off our credit card purchases in full by the next statement month, using a credit card instalment plan can help manage cash flow and liquidity. For example, allows us to convert retail transactions into interest-free instalments with flexible tenures ranging from 3 to 12 months. This is particularly useful for large purchases that we can afford to pay off, but that might cause short-term liquidity issues. Imagine having $20,000 in savings and spending $15,000 on furniture and electronics for a new home. Instead of making a one-time payment of $15,000, which would significantly reduce our savings, we could use to split the bill into six monthly instalments of $2,500 each. This approach maintains more of our savings and allows us to continue earning interest on the money in our account during the six-month payment period. It’s important to note that while the instalments are interest-free, credit card instalment plans may incur a one-time processing fee. According to Standard Chartered, this fee will be displayed when selecting the preferred instalment option before submitting the application. From now till 19 July 2024, when we register for the Spend & Win promotion via SC Mobile, spend on our Standard Chartered Credit Card and convert our retail purchases into instalment with EasyPay. Just like using regular credit cards, we need to be responsible when utilising credit card instalment plans. If we fail to pay our monthly instalment on time, we will incur interest charges similar to those we face when we do not pay our credit card bill in full and on time. Debt and credit, when used responsibly, can be valuable tools for managing our finances and do not need to be avoided at all costs. By understanding the financial instruments we use and ensuring we are disciplined in making timely payments on our credit card bills, we can utilise credit to enhance our financial situation. This means being aware of the terms and conditions of our credit agreements and keeping track of payment schedules and avoiding unnecessary interest charges.