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Credit Card Terms and Conditions You Must Know

Trying to decipher credit card Terms and Conditions (T&Cs) can be a frustrating effort. These documents are written in formal and technical language which is peppered with jargon that only a select few understand. As tedious as it sounds it’s very important to clarify some things before you sign up. But before you despair; the truth is, credit card T&Cs are standard.

We have prepared a short list of the key things to look for when you’re surveying your credit card’s fine print. These are the ‘must know’ terms!

Annual fees & Government Service Tax

Annual fee charges will depend on the type of card and the issuing bank. A typical Gold Mastercard/Visa/Amex will charge RM70 to RM200 in annual fees for the principal card and RM60 to RM150 for the supplementary card. Depending on the type of credit card, some banks offer to waive the annual fee if you reach a minimum number of swipes or if you spend the minimum amount required for waiver.

All credit cards are also subject to a government service tax of RM50 for the principal card holder and RM25 for the supplementary card holder. Some banks offer rebates on the tax if you spend a certain amount while others allow you to redeem your rewards points to pay. It is always worth checking with your bank on how you can save on the tax.

Credit limit

Though it will be stated on your monthly statement your credit limit should be the first thing you ask about. Typically, if you earn less than RM36,000 per annum, the amount will be twice as much as your monthly salary but long-term customers with good credit standings are eligible to apply for a credit limit increase. Although it goes without saying, avoid going over your credit limit as it will result in penalties and account suspension by the bank.

Minimum payment

The minimum payment is a small amount of your monthly credit card bill that must be paid to avoid penalties. Minimum payment is usually either a flat RM50 or 5% off your total credit card balance depending on whichever value is higher. Know your minimum payment rates so you’ll know what to expect even before your next statement arrives. If possible, strive to pay more than the minimum amount every month.

Interest rate

If there is absolutely only one thing you can take away from reading your credit card T&C; it’s the interest rates. A common misconception about credit cards is that interest is charged on everything you charge to your card. The truth is, you will only be charged for keeping an outstanding balance on your account over the interest free grace period (for most banks this is 20 days from statement date but you should check this as well on your T&Cs). So if you pay your bills in full, promptly, you will never have to pay interest.

If you’re having trouble getting on top of your credit card bills knowing your interest rates like the back of your hand will help prevent you from accruing more debt. Check if your card’s interest rate is a flat rate or tiered. Flat rates are a fixed percentage and are quite high (17-18%) while tiered rates are lower if you are consistent with your monthly payments.

Tiered rates range from 8.88% for prompt monthly payment for 12 consecutive months a year, increasing to 15-16% if you miss a month to 17-18% if you miss more than two months. Different banks have different criteria for the tiered rate. Citibank’s Air Asia MasterCard requires that payment must be 50% of the remaining balance for 12 months to qualify for the 8.88% where else the Maybankard 2 Card only requires that the minimum monthly payment be made on time every month to enjoy the 8.88%.

Keep in mind though that if you miss even a single payment, you risk having your interest rate reset.

Additional fees and charges

Last but not least keep a look out if your bank charges extra for specific services. For instance, using credit cards for cash advances and overseas transactions might cost you more than the usual interest rate applicable to retail purchases.

Understanding how your credit card works is one of the key ways to effective debt management. Remember that credit cards are just tools and if used wisely can save you a lot of money. At the end of the day we are solely responsible for our own financial decisions.

Original Article Source Link:

http://www.freemalaysiatoday.com/category/money/ 2014/07/02/credit-card-terms-and-conditions-you-must-know/

FMT News, dated 2^th July 2014

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