Credit cards are like symbols of wealth. Almost every working adult owns a credit card nowadays. Some own more than one. Me? I own just one. Why? I’ll let you know in a moment.
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.
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