Credit Cards In Malaysia – Frequently Asked Questions
What Is A Credit Card?
A card issued by a financial company, usually a bank to give the holder an option to borrow funds to complete purchases. Credit cards are primarily used for short-term financing and charge interest. The interest usually begins one month after making a purchase and credit limit is set according to the holder’s credit rating.
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Who Can Apply For A Credit Card?
There are two main criteria:
- Income: In line with the new Bank Negara Malaysia (BNM) Credit Card Guidelines introduced on 18 March 2011, a new credit card holder must earn a minimum of RM24,000 per annum.
- Age: The minimum age required to apply for a new credit card is 21. People who are at least 18 years old are eligible to apply for a supplementary card.
Why Use A Credit Card?
A credit card is a convenience for buyers to pay for products easily. If used sensibly, credit cards can help to earn cashback, loyalty points, spread the cost of expensive purchases, and even help you save money.
How Does A Credit Card Work?
Whenever you buy something with your credit card, you are actually taking a loan from the credit card issuer. In other words, you are borrowing money to pay for the purchase. At the end of each month, you will receive a statement from your issuer which shows your spendings, payments and how much you owe. It will also show the payment deadline and the required minimum payment you must make.
What Is A Minimum Payment?
The minimum payment is the lowest amount of money you are required to pay to your credit card issuer before the due date to avoid defaulting. A late fee might be imposed if the payment you make is less than the minimum payment, or if the minimum payment is received after the deadline.
What Is A Credit Card Balance?
It is the net amount of money owed or overpaid after factoring all debits and credits to your credit card account. A positive number means you owe money to the issuer, while a negative balance means you’ve overpaid. The overpaid money, known as credit will remain on your account until you use your credit card again, at which that credit will be used to offset the new purchase.
What Is Balance Transfer?
Balance transfer enables you to consolidate your debt in an existing credit card to a new card which will charge a low interest rate or, in some cases, as low as 0%. A percentage of your outstanding balance is charged for the service. If you don’t clear the debt by the end of the introductory-low interest period, you may need to pay a much higher interest rate – and you may not qualify for another new balance transfer card.
Can I Apply For More Than One Credit Card?
Yes. But only credit card issuers can approve your application for additional cards. If you already own multiple credit cards and your total available credit is high relative to your total income, card issuers might not issue you with more cards.
What Is Credit Card Interest?
It is the numeric representation of your credit card’s interest rate, shown in percentage. Credit card interest is represented by APR (Annual Percentage Rate) which includes fees and interest.
Will There Be An Instance I won’t Be Charged Interest?
Issuers will not charge you interest if you do not carry a revolving balance. A revolving balance means the portion of credit card spending that goes unpaid at the end of a billing cycle. If you have always paid the full amount on your statements, you don’t have a revolving balance hence you won’t be charged any interest. Most issuers offer a no-interest grace period of around 25 days from the date of your statement becomes available.
How To Lower The Credit Card Interest Rate?
There are three tiered interest rates regulated by BNM: Tier 1 at 15%, Tier 2 at 17% and Tier 3 at 18%. In essence, you want to qualify for Tier 1 to enjoy the lowest interest rate. To do this, cardholders must have settled their minimum payments promptly for a consecutive 12-month period. However, the rates only serve as a financial guideline and your credit card interest rate might be different according to your issuer.
What Is A Supplementary Card?
Additional card(s) that you can get on your existing credit cards to be offered to the spouse, parents or children. A supplementary cardholder does not need to have income but must be at least 18 years old. Any transaction made will be charged towards the principal account. The number of supplementary cards you can apply varies according to the issuer.
What Is A Secured Credit Card?
Some people might not qualify for a regular credit card due to non-existent or poor credit history. For them, a secured credit card is an option to build or re-establish their credit score. A secured credit card requires a collateral deposit, or security sum that becomes the credit line for that account. For example, if you put RM1,000 into the account, you can charge up to RM1,000. Secured credit cards usually come with higher interest rates and other fees and you are still required to make your monthly payment.
What Is A Prepaid Credit Card?
A prepaid credit card is preloaded with funds and is used like a regular credit card. Since it works in the opposite way of a regular credit card, it provides the cardholder the convenience of a credit card without having to fear about going into debt. It functions similar to a gift card. Because of that, most of the prepaid credit cards in Malaysia can be issued to anyone even without income or age requirements.
What Is A Charge Card?
A charge card is similar to a regular credit card but it requires the cardholder to pay his/her balance in full upon receipt of the statement in each month, minimum payment does not apply here. The major benefit of a charge card is that it has no pre-set spending limit. American Express is one of the world’s reknowned charge card issuers.
What Is A Rewards Card?
Rewards cards let cardholders earn points when they spend. These points can be used to redeem cash vouchers, petrol vouchers, entertainment discounts and items from the issuers’ redemption store.
What Is A Cashback Card?
A cashback card enables cardholders to earn a percentage of money back as they spend. The amount earned depends on the issuer and there is usually a capped limit on how much cash they can earn back, according to spending categories (groceries, petrol, utility or others)
What Is An Islamic Credit Card?
A credit card that is formulated on Shariah principles. Islamic credit cards cannot be used for transactions prohibited by Shariah such as the purchase of alcohol and gambling.
Which Credit Card Is The Right One For Me?
It completely depends on individual use, whether you’re using it for weekly purchases or clear debt. Always compare the credit cards in the market to determine the most suitable one for your lifestyle.
What Are The Standard Fees And Charges In A Credit Card?
Besides interest, these are the other fees and charges to expect in a credit card.
- Emergency issue/lost/replacement fee
- Annual fee
- Balance transfer fee
- Card replacement fee
- Cash advance fee
- Overseas transaction fee and currency conversion
- Late payment fee
- Over limit fee
- Statement charge
- Supplementary card annual fee