Monday, 28 September 2015

Is Credit Card a Bad Thing to Have?

I have been reading a lot on credit card lately, and I am applying one which I will elaborate further later. For those who already have a credit card or a few under their belt, you will understand that credit card can work as a double edged sword. If you think you will be out of control when you are on a shopping spree, and if you are the kind of person who will keep spending even though you are unsure of how you are going to finance it in a month time, it is advisable that you keep yourself as far away from credit card as possible, until you learnt the proper way of controlling your own spending habit. The key here is to spend less than you earn.

However, if you are like me who will think not twice but thrice about buying something, and able to pay the bill on time, owning a credit card can provide you two main benefits:

1)  Building up your credit history. It is very essential to have your credit history built up once you have started working because sooner or later you will thinking of buying car and house. But most of the time, people who are not as cash free as pensioners like me, would have to apply for loans, be it car loan or housing loan. Without credit history, banks would not even consider to approve your loan applications simply because the banks would not be able to gauge how trustworthy and credible you are. Simply put, you want to borrow money but if you did not have any record of repaying the money, the person wouldn't consider to lend the money to you. But if you have a record stating that you have been a responsible borrower and have been repaying the loan payment on time, it will boost some level of confidence on the person and the chance of him lending you money will increase drastically.

2) Cashback on different kinds of expenses. Malaysia is such a blessed country that it is a financial hub for some of the most generous banks you will see (no pun intended). Some credit cards provide you 5% cashback on petrol, some on dining transactions, some on retail transactions and even entertainment expenses. It is entirely up to you to take up which credit card, and one of the reasons should be the cashback that the credit card can provide. Of course, not everyone is entitled to all the cards offered by the banks, since one of the main requirements hinges on one's annual income. There are a few websites which have been very generous in sharing knowledge on which credit cards are the best, and which have the best cashbacks on the areas that you normally spend money on. Here are probably some of the best comparisons I have seen, so it is strongly encouraged that you take your time and read it!

For me, I personally chose Maybank Islamic MasterCard Ikhwan Gold Credit Card (such a long name haha!), due to the fact that I will mainly spend on petrol and maybe some groceries, and this card is free for life, meaning there is no annual fee or whatsover, unlike some of the credit cards offered by other banks. This is probably one of a few credit cards (that I know of) that provides 5% cashback on petrol and groceries on Friday and Saturday, capped up to RM50 per month (for spending up to RM1,000 per month). There are some other credit cards that offer 10% cashback on petrol but they are not free because of the annual charge incurred.

If I foresee myself spending RM50 per week on petrol, which amount to RM200 per month, I will be able to gain 5% x RM200 = RM10 per month. It may not seem much, but earning at least RM120 per year is still better than nothing! This has not even taken into account that I may spend on groceries during the weekend. So the earning is up to the amount that you spent.

Another card seems quite interesting to get is AEON Watami, if you spend between RM1k and RM1666.67 per month, it gives you a effective cashback of 3%. In other word, you will earn RM150 cashback with spending of RM5,000 per quarter. If you swipe the card at least 12 times per year, the annual fee will be waived. The only bad thing about this card is that it does not provide any cashback on petrol, so if the main component of your monthly expenses is petrol, this card may not be a good deal. On regards of the benefits, you can check out the AEON website here.

Do let me know if you know of any other credit card worth getting for one of annual income below RM50k, and spending less than RM2k per month.

Signing off.

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