
Minimize Credit Card Usage When Shopping In Order To Become A Savvy Consumer
What Is A Credit Card?
A credit card is an electronic payment tool that allows you to purchase goods or get cashless services. Using a credit card is a convenient way to make cashless payments for purchases.
How Does A Credit Card Work?
The credit card offered to you also provides a borrowing facility known as a credit limit, which has been set by the credit card issuer. When you use a credit card, the credit card issuer will make a payment to the merchant on your behalf and then notify you via a monthly statement that you need to make a payment.
The Benefits Of Credit Cards
Credit cards can be a beneficial tool if you utilize them responsibly. These advantages are available to you:
- It is an easy and effective payment option.
- Purchasing goods and obtaining services online.
- Track your spending with monthly statements so you can create a budget.
- There are credit cards that provide complimentary personal accident insurance and travel insurance coverage, depending on the type of card offered.
- Enjoy attractive schemes such as interest-free installment payment schemes, flexible payment schemes, and balance transfers at 0% to maximize your purchases.
- Earn reward points by using your credit card to pay for items and services that are often not available for cash payment.
What You Need To Know About Credit Cards
You need to understand the terms and conditions given before using a credit card:
Credit Limit
This is the highest amount permitted per card. If this limit has been reached, you cannot use the card until you have completed part of its payment.
The credit card limit is typically two to three times your monthly salary. Spending the maximum amount means you have already used two to three months of your future revenue!
Fees and charges:
There are different fees you need to understand:
Registration Fee | Issuers of credit cards might levy a one-time entrance fee. These costs might change depending on the card issuer. |
Yearly Fee | This is a fee to be paid when you receive a credit card. There are also credit card issuers who waive these fees if you meet your credit card usage requirements. |
Financial Charge | This fee is applied to the remaining balance after the payment due date and is determined using the daily balance. Currently, interest is assessed to credit card users in tiers. The purpose of this is to promote responsible credit card use. The following are the new tiers of interest rates: Refund Record – Cardholder who made the minimum payment for 12 months in a row. – Cardholders who pay the minimum payment for 10 months or more over a period of 12 months. – Others Interest Rate – 13.5% per annum – 16% per annum – 17.5% per annum |
Advance Cash Payment Fee | This fee is charged each time a cash advance is made and usually ranges from 3% to 5%. This fee is an additional cost that begins to accumulate on the day the cash is withdrawn. |
Late Payment Charge | This is a charge that applies if you fail to settle the minimum monthly amount before the established payment deadline. You will be charged finance charges (interest on outstanding balances) as well as late payment charges if you pay after this date. |
Service Tax | Starting in 2010, each credit card will be subject to an annual service tax of RM50 on the primary cardholder and RM25 on the secondary cardholder. This payment will be included in your credit card statement. |
Interest-Free Period
You can enjoy an interest-free period, usually between 20 to 50 days from the date the transaction starts to be recorded, if you do not have any outstanding balance from the previous month.
Therefore, interest will be applied to all credit card purchases starting from the day the
transaction is recorded if you only pay a part of the sum due or the minimum amount.
This means you will not benefit from an interest-free period if your credit card bill is not entirely paid by the due date and the balance is carried over to the following month. This interest will be assessed on the future transaction and compounded daily until the remaining balance is fully paid.
Balance Transfer Facility
To avoid paying interest fees, balance transfers allow cardholders to move all or part of their outstanding balance from one bank to another. Typically, banks will provide this service at a discounted rate as a “promotion” to get you to transfer your credit card balance to them. This might be a good proposition because you can save on the cost of benefits.
Flexible Payment Scheme/Interest-Free Scheme
The facility is offered by credit card issuers and selected merchants where cardholders can pay for installment purchases ranging from 3 to 24 months interest-free depending on the cardholder’s credit limit.
Liability Of Ancillary Cardholders
The primary cardholder will be responsible for incurring all payments on purchases made by ancillary cardholders. However, most credit card issuers require ancillary cardholders to bear liability jointly and separately against the debts of the principal holder and other ancillary cardholders.
How To Avoid Credit Card Traps
If you only make the minimum payment, it will take a longer period to settle the credit card debt and more accumulated. With high-interest rates, you pay more to the credit card issuer when compared to the original price of the goods or services you acquired.
How To Protect Yourself From Credit Card Fraud
Identity theft and unauthorized transactions are two of the most popular credit card scams. The companies that issue credit cards constantly monitor fraudulent activity. Additionally, you also have to take the necessary precautions to lessen your chance of becoming a scam victim.