Let's Share Knowledge: ADVANTAGES OF USING A CREDIT CARD

13 Ogos

How it works:
Credit cards give you a grace period (usually 20–45 days) before you have to pay for your purchases.
You can use this time to manage your cash flow — especially if your salary date and expense dates don’t match.
Example:
You get paid on the 28th of each month. Your car breaks down on the 10th and the repair costs RM800. With a credit card, you can pay now and settle the bill after your salary comes in, without dipping into emergency savings.
Extra tip:
If you always pay in full, you get an “interest-free loan” from the bank every month.

How it works:
Banks offer incentives like cashback (a % of your spending returned), points (redeemable for vouchers/products), or miles (for flights).
Example:
A card offering 5% cashback on groceries means if you spend RM500, you get RM25 back. Over 12 months, that’s RM300 saved.
Extra tip:
Use different cards for different categories (petrol, groceries, online shopping) to maximise rewards.

How it works:
If your card is stolen and used illegally, you can dispute the charges — most banks have a zero-liability policy for unauthorised transactions reported promptly.
Example:
If someone steals your wallet with RM500 cash, it’s gone. But if they steal your credit card and spend RM500, you can report it and not be held responsible (if reported quickly).
Extra tip:
Always enable SMS/email alerts for transactions to detect fraud immediately.

How it works:
Timely payments are recorded in your credit report (CCRIS/CTOS in Malaysia). This shows lenders that you’re reliable with debt.
Why it matters:
A good credit score helps you get approved for big loans (house, car) and even better credit card offers in the future.
Extra tip:
Even small monthly spending (RM100–RM200) paid in full each month can steadily build a strong credit profile.

Examples of perks:
- Travel insurance when flights are paid with the card.
- Airport lounge access.
- Buy Now, Pay Later instalment plans at 0% interest.
- Exclusive dining/shopping discounts.
Example:
Buying a RM2,400 laptop via a 12-month 0% instalment plan = RM200/month without interest, keeping your savings intact.

Detailed Disadvantages of Using a Credit Card

How it works:
If you don’t pay your full statement amount, the remaining balance is charged interest (~15–18% annually in Malaysia). This compounds monthly.
Example:
Owe RM1,000 → don’t pay in full → interest could add RM12–RM15/month. Over a year, that’s RM150–RM180 wasted.

How it works:
The bank lets you pay just the minimum (5% of balance or RM50), but this keeps you in debt longer and racks up more interest.
Example:
RM5,000 debt, paying RM250/month (5%) → could take years to clear and cost thousands in interest.

Psychological effect:
Paying with a card feels less painful than handing over cash, leading to impulse purchases.
Example:
You might buy a RM200 pair of shoes you didn’t plan to, just because the shop offers 10% off with your card.

Common fees:
- Annual fee (unless waived)
- Late payment fee (up to RM100)
- Cash advance fee (~5% of amount, plus interest from day one)
- Overseas transaction fee (~1%–3%)
Example:
Withdrawing RM1,000 cash via credit card → RM50 fee + interest immediately = expensive short-term loan.

How it happens:
Late or missed payments are reported to credit bureaus, dropping your score.
Impact:
Harder to get future loans, lower credit limits, higher interest rates.

Always pay in full — treat it like a debit card but with rewards.
Set transaction alerts to track spending in real time.
Match cards to spending habits (e.g., cashback for groceries, points for travel).
Avoid cash advances unless in emergencies.
Track monthly spending to avoid surprise bills.