ALL ABOUT CREDIT CARDS

The key to successful budgeting is deceptively simple - spend less than you earn.

But that is often easier said than done because you can't anticipate some expenses that may crop up unexpectedly. If you actively adhere to a budget however, these sorts of eventualities can potentially be addressed with less stress than would otherwise be the case.

Setting goals with budget planning

• Group financial goals into three time horizons - short-term, mid-term and long-term.
• Ask yourself: What do I need? What do I want?

Your answers to these questions will help define your goals. Once you know what you want, you can begin to budget with a purpose.

Short-term budget goals are those that you typically want to achieve over the next year. These may include paying off your credit card bills fully or saving for a vacation.

Mid-term goals are those you want to achieve over the next two to five years. For example, you may want to save for a downpayment on a new house or renovate your kitchen.

Finally, long-term goals are those that take more than five years to reach. Typically, these have to do with your retirement plans or for your children's future education.

Keeping your budget

• Record the purpose and amounts of your expenditure for one month.
• Account for everything; it may be tedious but doing so will give you a database of information about your spending habits.
• Gather all your receipts and include your credit card bills and loan repayments in this exercise.

As the days go by, you will be able to add up all your tracked expenses and compare it to your income. Remember the key to budgeting is to spend less than you earn. Your analysis will show if you are spending more than you earn and what expenses you may have to cut back on.

Evaluate what you consider as necessities and get rid of the luxury items. For example, instead of going out for lunch, pack food from home, or buy coffee from a hawker centre instead of from the fancy coffee outlets. Sometimes, luxuries can be disguised as necessities, and it's up to you to weed them out to help ease the strain on your budget.

If you are spending less than you earn, you are in good shape. You can use the extra money to pay a greater chunk of your debt, or increase your savings.

As a general rule of thumb, your debt repayments, including those on your credit card, should not exceed 40-50% of your take-home pay. If it does, you could be headed towards that danger zone where it is very difficult to rein in your debt.

If you're unsure that this may be happening to you, here are some warnings signs.

• Regularly spending beyond your budget
• Living from payday to payday
• Being unable to meet large one-off expenses like household insurance
• Always paying only the minimum repayments on your credit card bill each month
• Not knowing how much your total debt is
• Being near, or at, your credit card limit - especially if you have more than one card
• Consistently paying bills late
• Hiding your debt situation from your spouse or partner

If two or more apply to you, it could be time to cut back on your spending and reduce your debt.

Getting your finances under control is not always easy and it can take time. But there are several targets you can set for yourself that will put you in greater control.

Here are some pointers:

Each month, try to reduce a different spending category by 5-10%

For example, take public transport instead of driving on some days.

Start a savings account for large, infrequent expenses

If you spend less than you earn, your surplus can be allocated to expenditure on luxury items.

Charge items to your credit card only if you are sure you can afford to keep up with the monthly repayments

A credit card doesn't make you richer. It facilitates the more convenient use of money that you already have.

Treat a credit card balance like you'd treat a bank loan for the same amount

A credit card balance is essentially an unsecured loan which can get bigger very quickly on the back of interest charges. The best option is to pay your credit card dues fully so that interest charges don't kick in. Even if you decide to have an outstanding amount on your credit card, you must have a plan to repay it.

Avoid the "sale" mentality

When you buy a VND 1,000,000 item on sale for VND 1,200,000 you don't save VND 800,000. You spend VND 200,000. It's only a deal if you need it and can afford it.

Track your spending and income

Monitor how much of your hard-earned money you are spending to make sure you don't sink into debt.

Try to increase your income if you can

Is a second job possible? Can you sell something you no longer need?

Reward yourself

Working your way out of debt is a long, hard task. It's also a big accomplishment. Find inexpensive ways to celebrate your progress.

If you feel that your debt is getting out of control, you must tackle the problem immediately.

Sit down and prioritise your responsibilities. For example, meeting essential repayments such as your mortgage and utility bills should be your first concern.

If you are paying off multiple credit card bills, you should pay off those with the highest rate of interest first.

Most lenders are sympathetic to people who cannot afford repayments. Recovering debt can be very expensive to them, so they are often willing to work out an agreement with you.

The best way to handle your worries about debt is to arm yourself with information - not just any information, but credible, reliable, and well-backed information on credit. When you grasp the reality of the situation, it will calm your fears.

There is no single definition of fraud.

Some types of credit fraud that occur include identity theft, which is the unauthorised use of personal identification information to commit fraud or other crimes, and identity assumption which represents a long-term victimisation of identification information. Credit card users also have to worry about fraud spree, in which unauthorised charges are made on existing accounts.

There are several warning signs that credit fraud may be occurring. You may get bills arriving from unknown or unfamiliar sources, or receive calls from creditors or collection agencies about making payments that you know nothing about.

It is not possible to totally prevent fraud from happening, but there are measures that you can take to protect yourself.

• Sign on the back of your credit card the moment you receive it
• Keep an eye on your card as far as possible when making transactions
• Dispose of all personal documents properly
• Check your account balances regularly
• Review your monthly statements and report discrepancies immediately
• Inform your bank in advance of any address change
• Patronise only reputable websites when making purchases
• Beware of unsolicited e-mails asking for personal information
• Never lend your credit card to anyone
• Get the free Citi Alerts service to protect yourself

Credit card fraud on the Internet is growing and can catch anyone by surprise. To avoid becoming the victim of Internet fraud, do not give your credit card number online unless the site requiring your card details is a secure and reputable site.

You should never trust a site just because it claims to be secure. You should do your homework on the company to ensure that it is legitimate. Try to obtain a physical address rather than merely a post office box and a phone number.

For further reassurance, call the seller to see if the number is correct and valid. Send them an e-mail to see if they have an active e-mail address and be wary of sellers who use free web-based e-mail accounts.

Be cautious when responding to special offers, especially through unsolicited e-mail. If a deal is too good to be true, it probably is. Don't be conned by such scams

It is important to inform your bank immediately once you discover your card is not in your possession.

If your wallet was stolen or lost, you will need to report the loss of the wallet to the police, and the loss of your card to the card issuer.

Fraud prevention is a shared responsibility involving banks, customers and merchants.

Keep your card safe

• Choose a personal identification number (PIN) that's not your phone number, home address or your birthday.
• Memorise your PIN and don't write it on anything in your wallet. According to banking industry data, in a third of all ATM card frauds, the PIN was on the card or in the wallet. Destroy the PIN mailer that you receive after memorising this PIN.
• Check all your receipts against bank statements. You will be able to spot any unauthorised transactions.
• You should not lend your cards to anyone or leave cards and receipts lying around in your home or on your office desk.
• Use alert services provided by banks, for example Citi Alerts, to keep track of unauthorised use of your card.

There are several services in the market that you can get to protect against fraud. Here are some examples of security features that Citibank offers.

Protection From Unauthorised Use Of Your Card

Citi Alerts

• Be alerted via SMS each time your credit card is used.
• Customise this alert for transactions above an amount of your choice.

Citi Alerts also allows you to check your credit card account details like outstanding bill, payment due date, available credit line and last four transactional details.

Fraud Early Warning

Citibank's control system monitors your credit card transactions, and triggers alerts should there be any suspicious activity on your card, and you will be contacted immediately to verify your recent usage.

While it is not possible to protect yourself from all types of identity theft, there are some steps you can take:

• Protect your letterbox
  Your letterbox is a favourite target of identity thieves, so it is important to always remove your mail as soon after delivery as possible. Also, it is best not to dispose of mail containing your personal details in public bins.
• Protect your wallet
  Identity thieves also try to get access to people's wallets. Minimise your risk by keeping items with personal information in a safe place at home. Identity thieves look for information on old receipts. Don't leave receipts at ATMs or bank counters. It is a good idea to destroy all of your receipts when you no longer need them.
• Protect your credit and debit cards
  There are some very important precautions to take with your credit card. Whenever you receive a new credit card, sign on it immediately. Never loan your credit card to anyone. Notify your bank and other issuers when you change your address or phone number and be sure to report all lost or stolen cards immediately.

There are various ways a person can fall prey to a fraudster:

• Mail redirection
  Once fraudsters have documents with personal information of the victim, they can change the victim's address and redirect mail to themselves.
• Phishing
  This is where e-mails are created to look like they have come from a legitimate source, such as your bank. These mails will ask for account details or ask the account holder to update his/her personal details. Sometimes, they may even ask the victim to disclose his/her PIN.
• Cold Calling
  Some fraudsters call customers, offering non-existent products or services. During the call, they will ask the customer to confirm security information that they later use.

If you are the victim of identity theft, it is vital that you act quickly to minimise the damage to your name and your financial reputation.

In Singapore, the first thing you should do is file a police report. Even if the police can't catch the identity thief, having a copy of the police report can help you when dealing with creditors. Get a copy of the police report in case the bank, credit card company or others need proof of the crime.

When dealing with the authorities, creditors and financial institutions keep a log of names, dates, times, correspondence addresses and telephone numbers; include a synopsis of all conversations.

Follow up all conversations in writing, recapping the conversation and any conclusions that were reached. Keep and file all correspondence. Send all correspondence by certified mail, return receipt requested. Print out and file all email. Keep a record of the amount of time you spend working on the matter: You may later be able to seek restitution.