Credit Card Tutorial by GenX @ http://www.GenXGenYGenZ.com
Time does pass by in a flash, as it has been 7 years since I started blogging on 17th February 2009 at My Credit Cards Blogspot. The very first post I published had the same title as this article – Introduction To Credit Cards – CC101. The article was comprehensive (freaking long) and to my surprise, nobody complained and people actually thanked me for it. That made me realize that many people are oblivious to the pros and cons of credit cards and the problems/cost that may arise with owning a credit card. Since that day, I have published many articles relating to credit cards to assist credit card users to optimize their returns.
First, I will start off with a little bit of background information about my “qualification” to tutor (for FREE, so don’t expect good quality tuition, haha) you about credit cards.
I have been using credit cards for more than 25 years. I got my first Visa credit card while still a student in the USA at the age of 19. American Express upgraded my standard card to Gold status while I was still pursuing my undergraduate degree and my card states Member Since 88. When I came back to Malaysia, I requested that the USA AMEX Gold account be transferred to a Malaysian account. Imagine I was an unemployed bum back in 1991 with an AMEX Gold Card (at that time it was the highest ranked card in Malaysia, no Platinum yet) and people would say that it was a supp card. I also managed to transfer my US Classic Citibank Visa to a local account but subsequently cancelled it after they charged me Late Payment Fee and Interest for late payment as my cheque reached them late through post (that time there was no internet banking) due to the combined Raya and CNY festivals back in the early nineties.
First Lesson Of The Day – DO NOT GIVE THE BANK(S) ANY OPPORTUNITY TO IMPOSE ANY FEES/INTEREST ON YOUR CREDIT CARD ACCOUNT UNLESS YOU WANT TO BE POORER.
Below is a photo of My Credit Cards Collection in 2015 posted at GenerationsXYZ Blogspot. The reason I have so many credit cards is “shiok sendiri” lah, hahaha.
Seriously, no two credit cards are alike. Therefore, each of my credit cards has a purpose of its own.
On 1st January 2011, I “fired” my boss and went back to being an unemployed bum. And today, with the credit cards that I am still holding, the total combined credit limit from all my cards exceed half a million Ringgit. At one time it actually touched RM1,000,000 but I have since then cancelled several cards which are not FREE FOR LIFE as I did not want to be at the mercy of the banks where I need to beg them yearly to waive my credit cards’ annual fees.
Second Lesson Of The Day – if possible ONLY APPLY FOR FREE FOR LIFE CREDIT CARDS without any conditions or minimal conditions so that:
- You do not need to fork out a single sen for your credit card annual fee. Why the heck would anyone want to pay (including paying in kind by using reward points to offset the annual fee) for services/benefits that they can get for FREE is a wonder to me. If I request RM11.18 from you to read my FREE article(s), would you pay me? If yes, please donate RM11.18 to me via my PayPal account at GenXGenYGenZ.hotmail.com. Always remember – Cheap No Good, Good No Cheap BUT FREE IS THE BEST! But to be frank to you, a few of my readers are really generous and wanted to thank me by sending me FREE money and FREE Enrich Miles because they benefited from my articles!!! But I declined their generous offers (with monetary value) because many of my readers are my iFriends and they have provided me valuable information whenever I asked for assistance at my Facebook Page.
- You do not need to go beg yearly for the annual fees to be waived.
- You would not feel like a dumb-ass in the event the bank rejects your request for the annual fee waiver, haha.
Many people would initially apply for a credit card for convenience sake (safer than carrying a bunch of notes). But credit cards were not created to provide convenience. The sole reason why credit cards exist is to make the banks more money. Basically, when one applies for a credit card, one is applying for a loan facility. And the maximum loan amount approved that can be utilized is called the Credit Limit.
30 to 40 years ago, the people who really wanted a card for convenience sake (instead of carrying cash) would apply for a charge card. Those who applied for credit cards were those who were in need of cash as applying for a credit card was the easiest method to get a loan as one does not need to provide any collateral. One could easily obtain a credit card by providing documents to the banks to prove that they earn a mere RM1.5K/month and the banks would happily issue them credit cards.
Like I said, majority of those who apply for credit cards are those who are in need of cash, ie. broke or no savings. So come Due Date to make their credit card payment, most likely they can not afford to settle the bill in full and would only pay the Minimum Amount Due. Whatever unpaid Outstanding Balance will then be imposed freaking high interest rate by the credit card issuer (bank). Thus making the bank richer and the cardholder poorer. OR as I like to put it, the cardholder is a slave working for the bank for FREE!
Studies have proven time and time again that people who hold credit cards spend much more than people who use cash. Not only that, many people have gone bankrupt because of credit cards as they do not have the discipline to control their spending. You can go google this and read the findings yourself.
Third Lesson Of The Day – If you are trying to stay afloat with your current income and have no savings today and then use your credit card, what makes you think you will have money tomorrow to pay the credit card bill? If you are really trying to stay afloat with your current income, DO NOT USE YOUR CREDIT CARD.
For those who intend to apply for a credit card for the sake of convenience instead of carrying cash, the above three lessons of the day is all that one really needs to know and practice when getting a credit card.
But then again, you don’t really need a credit card nowadays as a Debit Card and even Prepaid Visa and MasterCard give you the exact same function in terms of convenience and security.
Before you proceed any further in taking this tutorial, IT IS A PREREQUISITE that you read my article titled LIFE – GOAL IS TO BE DEBT FREE by clicking here right now.
It is imperative that you read the above article as it will show you as to why so many people are in debt nowadays because of credit cards. Only after reading it, only then may you proceed to take the rest of this Credit Card Tutorial or else you may just end up joining the hundreds of thousands permanently stuck in the shit hole of debt and become poorer by the day. I am not joking and you have been warned.
CREDIT CARDS ARE CASH COW FOR THE BANKS
Financial Institutions make tons of money from credit cards and that is why you will find that all banks in Malaysia are credit card issuers.
The card issuer earns a commission whenever you use their credit card. So, the more people using their credit cards, the more money they make.
The banks also make money from cardholders who fail to settle their monthly credit card bills in full. As I mentioned earlier, the bank will impose interest on unpaid balances. And in my article LIFE – Goal Is To Be Debt Free, I have shown you in 2010 that only 30% of cardholders pay their credit card bills in full every month. The rest of the 70% has a total outstanding credit card debt of RM30,8000,000,000!!!
Assuming that all the banks impose a 10% interest on the above mentioned RM30.8 billion, that equates to RM3.800,000,000 in profits for the banks!!! Now, credit card interest rates are much higher than 10%. It can be as high as 18% or even 20%; which means the profits the banks made is much higher than what is mentioned in this paragraph and the combined cardholders who were imposed interest were getting poorer by the same amount yearly.
The credit card industry is a very lucrative business for banks/credit card issuers as they charge exorbitant interest rates (compared to OPR/BLR) on Outstanding Balances. On the other hand, it is also a very competitive business where banks compete among each other to ensure that card holders use their bank’s issued cards.
So, the banks have to constantly come up with “benefits” as marketing gimmicks to attract new customers and retain existing cardholders. Don’t be mistaken that the banks are being generous, because the money they spend in dishing out the benefits is peanuts compared to the profits they make from imposing interest onto those who fail to settle in full their credit card bills monthly.
But for the minority 30% of cardholders in Malaysia who do pay their credit card bills in full every single month, my articles and this tutorial will teach you how you can earn FREE pocket money by optimizing the benefits that come with the right credit card based on your spending pattern.
Before I go into detail as to how you can earn extra FREE Pocket Money by owning the right credit cards, I will present and highlight to you the basics of credit cards first. But, more importantly, credit card is a very dangerous tool that can lead you straight into the shit hole of debt. Once you fall into the shit hole of debt, it is very hard to get out.
BANK NEGARA MALAYSIA GUIDELINES FOR CREDIT CARDS
On 18th March 2011, Bank Negara Malaysia announced 3 very significant new rulings on credit cards: