Credit cards are basically a type of loan which are given out by banks or financial institutions to those who would like the convenience of not carrying cash. However, it has become a method of using money into the future which have caused debt problems for people today. This is because, unlike in the 1980s, credit cards are easily and widely available for anyone who meet the criteria.
In Malaysia, anyone above 21 years of age is eligible to apply for credit cards with a minimum income of RM24,000 per month. One would usually need to provide certain documents to apply for the card that include your MyKad, an letter that certified that you are employed in the company with a minimum yearly income of RM24,000, the latest income tax statement or EA statement that stipulates clearly your income level and bank statements if necessary. Pay slips and advice too are needed to prove your income.
Take note that the higher your income, the more credit the institutions will offer you. It is up to you to accept the cards and use them in the future.
The most common credit limit offered would be RM5,000 although you can request for lower credit if you like. If your annual salary is higher, this could go up to RM30,000. This means that you will be able to spend up to the maximum amount of the limit offered by the bank and then the interests are charged from there.
Contrary to what many believe, not all the credit cards are the same. You must first know what you are looking for. If you are going to use the card for convenience and for purposes like petrol and such, then look for the bank that offers rebates for such purchases. If you are looking for one that allow for flexible instalment plans for purchases then shop around and identify the bank that gives the best flexibility and plans. You must do your homework before you actually apply for the card so that you will be able to enjoy the best benefits.
The temptation of using credit cards to purchase items is very common especially with the rising price of things today and the fact that these options are easily available to anyone with an income. Typically, the use of credit cards can be damaging to one’s financial standings if it is not managed properly particularly when one is spending into the future instead of using this facility for convenience.
One of the many factors that credit card users are not aware of when using them which then caused a spiralling debt situation is that there are many types of charges which might be small in nature but would accumulate into bigger amounts in the future. Hence, before swiping away ignorantly, this guide provides you with the information about what you type of charges which you must be aware of.
The most important that one must be aware of is the annual fees. Today, most banks try to minimize Annual fees as the customers are not too receptive of these charges. Despite that, there are still many who are still very imposing such charges. If this is overlooked, one would be paying some RM60 to RM90 for a standard card while a gold card would go from RM130 to RM200 depending on the bank.
Certain banks also impose a Joining Fee where it is a one-time charge very much like a registration fees. This would usually range from RM50 to RM100 depending on the issuing bank.
There is an interest free period for purchases and charges and this would usually range for the first 20 to 30 days depending on bank. This is in situations where you completely pay off for the related purchase. For instance, you purchased a computer from RM2,000 on the first of July and if you repay RM2,000 by the 20th of July, there would be no interests charged. This is if your credit card do not have any outstanding amounts or interest will be charged on that.
The credit card can also function as that of an ATM card where you can withdraw cash as long as there are available credit in your account. This is where one must be very aware that cash advance comes with very high interest. The minute any amount is withdrew from the account, a 3% or 5% interest is charged on the amount. After that it will undergo similar charges to that of the credit card which is at 18% per year.
There is also a recently imposed annual RM50 fee as required by the government which is supposed to deter people from owning too many credit cards.
In all cases, you are only required to pay RM5% of the total amount owing to the issuing bank. If you fail to pay this amount after the due date, a late payment charge will be imposed. This would usually be 1% of the outstanding balance or in certain situations a maximum of RM75 is imposed.
The standard interest charges for credit card is at 18% per year or 1.5% per month. This means that if you fail to settle any amount owing to the issuer, a 1.5% interest will be imposed and this will continue to accumulate until you settle your amount totally.