As millennials start getting their hands on a first Credit card, many of them still do not know how a credit cards function, let alone the right ways of using them.
If you just got a credit card or thinking about applying for one, here are 7 things about credit cards you may not have realised but should.
7 Things Young Malaysians Do Not Know About Credit Cards
1. Credit card reward points expire
Many of you may think it is great to be earning reward points while spending with your credit card, so you tend to earn more until it is enough to redeem the gift you desired. The truth is, most credit card reward points expire within a time frame of three to five years, depending on the issuing bank.
So the next time you are planning to redeem those credit card reward points of yours, bear in mind that you will not want to waste any of it due to the expiry period imposed. Our suggestion is to review your reward points every year and redeem gift/vouchers with the highest value. This way, you will not waste any reward point at all!
This applies to air miles credit card as well, hence, you should also be careful with the conversion of your air miles in your credit card to any airline loyalty program.
Learn how to utilise your AirAsia BIG Points here or how to utilise your Enrich Miles here.
Here is a helpful guide to learn all about rewards credit cards.
2. Not all credit cards are expensive
While some premium credit cards come with a hefty annual fee, there are plenty of credit cards that come with zero annual fees, for life!
Some banks to impose several requirements in order to waive that annual fee such as minimum swipes or spending in 12 months. On top of that, you should consider the late payment fee, balance transfer interest and interest charges imposed before applying for a credit card.
These are the hidden costs behind credit cards, and they are all different. Hence, it is important to find out these costs and compare before making any decision. Or, you can click here and find out the best credit card that fits your needs!
3. Credit cards should not be just a source of loan
A credit card is designed to bring convenience in terms of payment and provide extra savings through cashback or rewards points. However, many millennials are taking advantage of the cash advance feature and assume that this is quick financing solution to resolve their financial problems.
If you have something planned which can wait for a couple of weeks of months, you should get a personal loan instead. With a mere 6% to 8% interest rate on average, you can save more with a personal loan rather than using a credit card that charges 18% interest per annum.
Not sure where to look for a personal loan? Compare all the best deals here.
4. Do not let anyone else use your credit card
In case you are still not aware, credit card fraud and theft cases are pretty common these days and sometimes it is because of you being reckless. If you are not careful when handling your credit cards, anyone can take a quick peek at your pin code and steal your credit card afterward. Yes, there are security measures you can take, like immediately contacting the bank, but it is still a painful process to go through.
Did you know that even if you give consent to your friend, family or spouse to use your credit card, you could be penalised. They should apply for a supplementary card or a new credit card on their own. However, you can pay on behalf of them and get the payment from them later on.
5. Credit card’s installment plan does not mean you are charged every month
When you purchase a big-ticket item, you are charged the full price even though you are paying it on an installment plan. That means, you are actually owing the bank money and paying it back over an agreed period such as 12 months.
Despite so, many tend to misunderstand this plan and assume they still have plenty of credit limit to spare since they are only paying a small amount every month.
So the next time you are planning to make a large purchase, you need to consider the credit limit you have left and your financial capability to afford it on a monthly basis.
6. Credit card bill needs to be paid at the end of the billing cycle, not at the end of the month
Credit cards have ‘billing cycles’, which range from 27 to 34 days. You need to pay back the debt before the end of a billing cycle if you want to avoid interest charges or late payment fees. However, most of you may be surprised to note that the billing cycle may not necessarily be at the end of the month.
For example, if you start using a card on the 20th of October, and the billing cycle is 27 days, the payment may be due on the 16th of November instead of the end of October.
Hence, it is important to hold only three credit cards as most – you don’t want to get confused between all the different billing cycles and miss your payment.
7. Denying a credit card does not mean your credit score is in good shape
On the contrary, owning a credit card may help you to maintain a better credit score if you know how to use it properly. Read here to find out why you should own more than one credit card.
The simple rule is, if you have no credit history, the bank has a problem of realising how reliable you are in paying back debt. Hence, they may perceive the risk of lending out a loan to you is higher than those who own a credit card.
So to solve this, you can apply for a zero annual fee credit card and use it for minimal expenses such as petrol refill or grocery shopping. As long as you clear your credit card debt, you are on the right track to achieve outstanding credit score.
Now that you have finished reading this, we hope you have a better understanding of how a credit card works and how to avoid the pitfalls. Need to know more? Keep reading on other credit card articles here for the latest information!
The post 7 Things Millennials Don’t Seem to Know About Credit Cards (But Should) appeared first on Financial News and Advice in Malaysia.