Have you thought about applying for your first credit card? Or perhaps you've had them for awhile but still can't get your head around the details. Not a problem; we're here to help. Check out some of the most frequently asked questions we've received from readers like you - and our answers!
Am I Eligible?
If you are earning less than RM2,000 per month, we have bad news for you. The minimum income requirement to qualify you for a credit card as a first time applicant is RM24,000 per annum, replacing the previous minimum income requirement of RM18,000 per annum, in accordance with the 2011 Bank Negara Malaysia (BNM) guidelines.
How Many Credit Cards Can I Own?
There is no limit to the number of credit cards you can own unless you earn less than RM36,000 per annum. If that is the case, you can only own credit cards from two different credit card issuers in Malaysia and your combined credit limit will be capped at a max of RM12,000 (but whether you get this amount depends on the banks you choose). You can own credit cards from any number of credit card issuers in Malaysia if you earn more than RM36,000 per annum.
However, note that each credit card you own comes with a yearly service tax. For principal credit cards, it is RM50 per card per year, and it is RM25 per card per year for supplementary credit cards.
What is My Credit Limit?
BNM imposes a credit card limit of two times their monthly salary for those earning under RM36,000. The credit limit for those earning more than RM36,000 is at the discretion of the credit card issuer. It's important to know what your credit limit is and to not exceed it as doing so may incur extra charges with many banks.
Interest rates vary among card providers, but they must adhere to BNM's tiered pricing structure for credit cards. There are three tiers of maximum annual interest rate in which the credit card providers can charge their users:
- Tier 1 - Maximum of 15% per annum, for those who settled their minimum payment amount for 12 consecutive months.
- Tier 2 - Maximum of 17% per annum, for those who settled their minimum payment amount for at last 10 months in a 12-month cycle.
- Tier 3 - Maximum of 18% per annum, for those who settled their minimum payment amount for less than 10 months in a 12-month cycle.
This means that it is important to pay your bills on time. Some cards in the market offer 8.88% interest but these preferred rates often come with additional requirements. For example, some banks will require you to pay a minimum of 50% of your balance in order to qualify for the 8.88% rate. Paying the minimum amount will definitely not be enough.
Most cards charge an 18% interest rate on cash withdrawals using the card.
What is the Interest-free Period?
Most cards have a 20-day interest-free period where if you were to make a payment by the 20-day limit, you would not be charged an interest. This usually applies to retail purchases.
What happens if I fail to repay my credit card on time?
We are venturing into dangerous territory here. If you miss your first minimum payment amount, you will be slapped with a late payment charge of either RM10 or 1% of the outstanding balance, whichever is higher as of statement date, up to a maximum of RM100.
After one or two months of no payment, you would start receiving letters or calls from your credit card issuer, and if you ignore those letters, the credit card issuer may send a collection officer to your residential address. While they may not resort to extreme methods employed by loan sharks, they would not be too chummy about it either. There is a good chance your card would have been blocked anyway, if you've reached this point.
Repeated late payment would cause you to be blacklisted in BNM's Central Credit Reference Information System (CCRIS). As the blacklist is shared among different banks, so it would not be wise to get on the dark side of CCRIS.
The ultimate action that credit card issuers could take against non-payees is to sue them for the sum owed. Malaysian laws dictate that a person could be declared bankrupt if he or she defaulted on an outstanding debt amounting above RM30,000 for more than 6 months.
Should I apply for a card solely for a Balance Transfer?
Balance transfers allow you to consolidate your debts from other credit cards into a single credit card or simply move a balance from one card to another to take advantage of a low interest rate (sometimes as low as 0%, for a certain number of months ranging from 6 months up to 36 months) to to help you optimise your payment regime.
However, some banks do not take lightly to people solely applying for credit cards to transfer a balance and if they suspect that is what you are doing; they will be quick to deny your application. That said; it doesn't mean you shouldn't try. However, remember that for balance transfers; your credit limit needs to be enough to cover the balance you want to transfer and you wouldn't be able to guess how much of a credit limit the bank will give you when applying for a card.
In short, consider the pros and cons of applying for a card for this reason by getting to know balance transfers a little better first.
What is Credit Shield or Credit Balance Insurance and Should I Get it?
Credit shield (or credit balance insurance) works a little like the MLTA/MRTA works for home loans. It insures your credit balance so if anything were to happen to you; you don't have to worry about paying off your credit card. Just like any insurance product; some may argue why it is necessary to pay premiums to safeguard the bank's interest in retrieving the amount but some others will argue that having to worry about one less debt when a loved one passes away is a good enough benefit to warrant the premium. In the end, it is up to you to decide if the insurance is something you want.
Credit cards often get a pretty bad rep in general but for the people who've used it wisely; it's a great financial tool to obtaining and managing the money you have. But as with any banking product; it is best applied for only when you have all the details.