Is credit card good or bad? It really depends on how you use it. However, there’s certainly no doubt that it is very convenient and user friendly. Banks are currently aggressively promoting their credit cards. And why not? It’s a huge money maker for them as the interest rate charged are the highest at 18% per annum.
If you are a seasoned credit card user, I’m pretty sure you already knew some of the things I’m going to reveal. But I won’t bet my money on it. That’s because most credit card holders are really ignorant people. And who stand to benefit from this but the banks themselves!
Do you know...
1. You can spend over and above your credit limit?
Yes, it’s absolutely true. And banks don’t want to tell you. The reason? They can charge you RM50 for exceeding your credit limit. So, if your credit limit is RM3,000 and you accidentally spent RM3,015 thinking that the transaction won’t go through if it’s above your limit, then don’t be surprised when you see RM50 charged to your account in the next statement.
2. Banks can transfer funds from your other accounts (eg. Savings, Current) from the same bank to pay off your credit card debts without the need to inform you?
Yes, it’s legal and have been done many times. For example, if you are a Maybank credit card holder and you have a savings account with Maybank. If you owe Maybank RM8,000 in credit card debt, Maybank has the right to take RM8,000 from your savings account to pay your debts. And they don’t have the obligation to inform you! My advice? Don’t open any accounts with the bank that issued you the credit card. But the best option is of course, don’t owe any credit card debts!
3. Banks can increase your credit limit at their own discretions without asking for your consent?
True again. Of course, you can reject, but few people will take the trouble to do so. Once you continue using your card, you are deemed to have consented to the increase in credit limit. I should know because I started with a credit limit of only RM3,000 8 years ago. Today, my credit limit has reached RM14,000! Now you know why I said earlier I only own one credit card? Because ONE is enough. I don’t want to be tempted in spending more than RM14,000 a month!
4. You can choose not to pay the annual renewal fee?
Yes, it’s very true. Because credit card is such a competitive business, most banks usually allow you to skip the annual payment to prevent you from switching to other banks. However, this is provided you call them up and insist that you don’t want to pay the annual renewal fee. Believe me, they don’t want you to call!
5. You will be charged RM10 or 1% on the total outstanding balance(whichever is higher)for late payment effective 1st July 2008?
Presently, the minimum charge for late payment is RM5 or 1% on the minimum payment due(whichever is higher). But effective 1st July 2008, the minimum charge will increase to RM10 or 1% on the total outstanding balance(whichever is higher) (subject to a maximum of RM100).
To compare the old and the new rate, let's say you have an outstanding balance of RM500. The minimum payment is 5% of the total outstanding amount which is RM25. If you pay just one day late, you now have to pay RM5 in late payment fees, but with the new rate, your late payment charges will double to RM10.
On the other hand, if you have an outstanding balance of RM20,000 the minimum payment is RM1,000. If you pay the RM1,000 late, you now have to pay only RM10 in late payment fees, but with the new rate, your late payment charges will increase tenfold to RM100 (the maximum allowed)
6. You can pay lower interest rate starting from 1st July 2008?
This is supposed to be good news and really it is, until you read No.7 below. Yes, Bank Negara will be implementing the Tiered Interest Rate on 1st July 2008. With this ruling, you can lower your card interest rate from 18%p.a to 15%p.a.
It works like this. If for 12 consecutive months, you are faithful in paying the minimum amount on time, your interest rate will be reduced to 15%p.a. from the 13th months onwards. (This is known as Tier 1).
If for 12 consecutive months, you manage to pay minimum amount on time for 10 or 11 months, your interest rate will be reduced to only 17%. (This is Tier 2).
Those that are not in Tier 1 or 2 will be in Tier 3, where the normal 18% interest rate applies.
But this good news is sinking as fast as the Titanic. To know why, read No 7.
7. All credit card holders who don’t make the full payment on their cards will not be able to enjoy the 20-day interest free period effective 1st July 2008?
Don't you think it's too much of a coincidence to have this implemented also on the same date ie. 1st July 2008? I have already mentioned about this ruling in my older post (Read it here). In other words, if you are supposed to pay RM2,000 for last month and you paid only RM1,500, then any purchases you made with your card this month would be charged interest starting from the date of your next statement. Don’t you agree this makes a complete nonsense of the reduced interest rate plan (No.6) above?
So, dear credit card holders, be smart and use your credit cards wisely.
Very informative article. I own a credit card, but only use it when I have to. Mostly use my Eftpos card(Cash card) here.
Thanks for sharing this information. I didn't know come this 1 July 2008, the banks will make so many changes. The last 7th item will only make the banks richer.
s for the info. i been using crdit cards for so long n i never knew abt most of this. i just paid wat ever's on the bill
i meant to write thanks :)
Wah really informative le.. I din know all that.. thanks for sharing lol
I own a Visa classic credit card and I have been using it since 1997. I use it mainly to buy essentials such as groceries and petrol. Each month I settle the dues in full.
Like all credit card users I have been enticed with all kinds of offers, free gifts and joining and annual fee waivers to sign up with other credit card providers but have never succumbed to any of the hard sell marketing tactics. Even the bank that issues my credit card continues to upgrade my credit limit from time to time without even asking me in advance if I want the upgrade.
I know many people who owns more than one credit card and are quick to flash it about in your face like some kind of status symbol.
As for me I have never viewed the credit card as a status symbol, but just another alternative instrument of spending. I don't see the rationale of owning more than one credit card.Why bother with keeping track of so many separate accounts and expenditure when you can buy all the goods and services that you want with only one.
The bank would like you to keep on paying the annual fees if you keep quiet about it. In my case even though I am a value customer (the bank says so each time it increases my credit limit unilaterally without asking me first in advance), I still have to fill up a form in May each year to remind the bank to waive the annual fees.
The credit card is neither good nor bad. It is good and beneficial if you know how to regulate and manage your expenditure. On the other hand, if you abuse the system and spend like there is no tomorrow the mountain of unpaid debt piling up can bankrupt you before you realize your folly.
Very informative..Is it applicable to all type of CREDIT CARDS.?
Very informative. As for the annual fee, Citibank actually refused to waive it for me because I VERY seldomly use that card. In the end, I canceled the card, but after a month they sent me another replacement card. Haha...
Thx..I didn't know abt the guideline from the 1st of July...Thx
Way to go, cc. Use less of your credit card and you won't regret.
mun, sometimes I wonder if Bank Negara is helping us or helping the bank earn more money. With the 20-day interest free period taken out, the bank will be making easy money cos about two thirds of Malaysian card holders don't settle their credit card payment in full.
beng beng, as long as you pay whatever's on the bill on time, you have nothing to worry about! : )
keeyit, u r welcome : )
spacious moments, i totally agree with everything you said! If every credit card holders think like you, there'll be no credit card debts in the world! Rest assured you won't be very popular with the banks!
karthik, as far as I know, it applies to all credit cards in Malaysia only. (If I'm wrong, will someone pls correct me)
neo, you did the right thing! If they refuse to waive the annual fee, just cancel the card. There'll be so many other banks lining up to offer you a new card. But looks like your bank want to retain you cos they sent you a new card. Ha ha, they'll be stupid not to.
falcon, u r welcome. A lot of people don't know the new ruling too, most will just get a shock when they see all those charges in their next month's statements! So do let everyone know through your blog!
Thanks for such a great information. I only have 1 credit card and it's only a silver card, mostly use to purchase stuff online and recently I started using debit card, with this approach, it can stop me from using future money.
yeah, i had bad experience with credit cards :) the 2nd item, i experienced it before. not very happy about it, they just suspended my saving account and deducted such a big amount. (okay.. my fault, owing them :D) but yes, they never gave any notication that they would do that. imagine my horror, after planning how to spend the already tight budget, suddenly a big chunk of the money was gone. T_T
anyway, like one commenter said, credit card is neither good or bad. it is depends on the user. it can be a good tool, and it can make your life difficult.. (actually.. we make our life difficult.. hehe)
ps: nice blog man! :)
kenneth, you are doing the right thing. One credit card is enough.
bongkersz,that's a bad experience for anyone!Thanks for sharing it here : )
good to bring this issue up as many consumers do not know what's the impact that cld hit them big time on yr last point there which will take effect on 1 july 2008
Johnny Ong, yes most people don't know. You can help out by blogging about it.
think we just have to make payment when its due :) but thanks for the share - very useful.
Just make sure no outstanding balance every month, and pay on time. You'll be safe from all the scary super high interest rate that's gonna charge on your bill.
Smart people make use of credit cards to enjoy cashback and manage cashflow. Be financial intelligent. :)