DEFINITION OF CREDIT

Credit in banking terms is purchasing power created by banks through lending based on
fractional reserve system. It is a contractual agreement by financial institution. A credit
agreement is a legally binding contract made between a person who borrows money and the
lender. It is agreed upon by both parties and outlines the terms of repayment, the fees, other costs
and all the rules and requirements pertaining to the loan and generally with interest.
ABOUT CARD CREDIT

Before using a credit card, you need to understand the terms and conditions provided below:

i. CREDIT LIMIT

Credit card have maximum limit for each card. If you used to exceed the limit of credit card, you
cannot use the card unless you pay the part of credit card loan balance. Limit of credit card is two
to three times your monthly income. If you use the maximum limit, this means you have spent
two to three months of your future earnings.

ii. FEES AND CHARGED

PARTICIPATION Credit card issuers may charge a one-time participating fee.

FEE This fee differs from one card issuer to another.
ANNUAL FEE This is the annual fee paid after you receive a credit card.
Credit card issues will probably exclude this fee if you meet
the credit card use requirements.
FINANCIAL This is a charge charged on the outstanding balance after the
CHARGES payment due date. Credit card holder who make payments
within the set period enjoy the following benefits as follows:
REPAYMENT RECORDS INTEREST RATES
Explain the minimum Up to 15% per annum
payment for 12 consecutive
months
Explain a minimum Up to 15% per annum
payment of 10 months or
more over a 12 month
period
Does not meet above criteria Up to 18% per annum
CASH ADVANCES Different fees -3% to 5% of total cash withdraw or maximum
FEE RM10- RM20 which one is higher.
LATE PAYMENT Have charge if you failed to pay minimum monthly before
CHARGE specified payment deadline. If you pay after this date, and
you get the charged to finance charge (interest on outstanding
balance) and also a late payment charge of as much of 1%
 from the outstanding balance (minimum: RM5 to RM10,
maximum: RM50 to RM100)
SERVICE TAX Started 2010, service tax charged on:
Primary card holder- RM50 per year
Side card holder – RM25 per year
ADMINISTRATIVE Different from 1% to 1.5% from amount transaction.
COSTS FOR
OVERSEAS
TRANSACTIONS
CAPACITY OF CREDIT CARD

“There are some universal elements that are pretty straight forward, but there are also less
obvious factors that are considered by a lender,” explains Carl Lamoureux, Senior Manager,
Credit Risk at National Bank of Canada. “For instance, someone who has depth in their credit
experience and has demonstrated an ability to properly manage that credit will be viewed with
less risk than someone without that history.”

Capacity measures a borrower's ability to repay a loan by comparing income against recurring
debts and assessing the borrower's debt-to-income (DTI) ratio. Lenders calculate DTI by adding
together a borrower's total monthly debt payments and dividing that by the borrower's gross
monthly income. The lower an applicant's DTI the better their chances of qualifying for a new
loan. Every lender is different, but many lenders prefer for an applicant's DTI to fall around 35%
or less before approving an application for new financing.

It is worth noting that sometimes lenders are prohibited from issuing loans to consumers with
higher DTIs as well. Qualifying for a new mortgage, for example, typically requires a borrower
to have a DTI of 43% or lower in order to ensure that the borrower can comfortably afford the
monthly payments for the new loan, according to the Consumer Financial Protection Bureau. In
addition to examining income, lenders look at the length of time an applicant has been at his job
and job stability.
QUALIFICATION FOR CREDIT CARDS

Most banks in Malaysia expect candidates to have finished 21 years old. Age criteria is forced to
ensure that the candidate is a winning individual from the general public and he/she can pay back
the duty. Be that as it may, to apply for a valuable charge card, the base age criteria is ordinarily
18 years. There can likewise be a set criteria of the maximum age until the point that when you
can apply for a credit card.

Your yearly pay decides whether you are fit for paying your bills, and also expenses and accuses
related of the card. Contingent upon the credit card that you care applying for the bank has a set
yearly/month to month pay paradigm that you need to satisfy in the event that you need a
specific card. The base compensation to apply charge card in Malaysia is RM24,000 Per Annum.
The more advantages a card brings to the table, the higher the yearly salary necessity is. That
implies your fundamental month to month pay must be above RM2000 per month, which banks
cross check with your pay slips and in addition EPF derivations made by your organization. On
the off chance that your pay is over this limit, you can apply for a lot of "Gold" Visas. Platinum,
Infinite, Reserve, and other premium-level cards have higher least salary necessities.

Your current obligations and advances will be analyse while evaluating your credit card
application. On the off chance that your duty are surpassing past an allowed limit which is
resolved by your salary, your application may get declined.

Incomplete of appropriate documentation and verifications of your income will dismiss your
charge card application. Every one of the reports and printed material put together by you should
be true and legitimate. Each bank has an alternate arrangement of commitment with regards to
records. In any case, you have to gather the fundamental records that incorporate, recognizable
proof confirmation, pay slips, bank articulations, and so on.

On the off chance that you are a remote national applying for a charge card in Malaysia, you
need your substantial working permit and business affirmation letter while applying for a credit
card.

Besides, in the event that you have a decent association with your bank, you can get your credit
card affirmed faster. Numerous banks offer a charge card considering your relationship and
resources kept up with the bank.
ADVANTAGES OF CREDIT CARDS

The speed of purchasing something by using a credit card. In the event that you have to purchase
something costly and can't bear to pay for it across the board go, at that point a charge card is
perfect, as long as you utilize it sensibly. A 0% buy charge card enables you to pony up all
required funds and after that spread the expenses over various months, by making a progression
of installments to clear the parity. For whatever length of time that you pay this aggregate off
before the finish of the intrigue free period then you won't get charged anything for utilizing the
card along these lines. In any case, miss this due date and you will pay a punishment as
enthusiasm being added to the equalization every month.

Besides, you will get more protection by using credit cards. You get more assurance in the event
that you pay with a credit card instead of you pay with debit card, cash or check. On the off
chance that you purchase something that is lost, stolen or damaged, you will recover your cash in
the event that everything turns out badly. As it were, if the organization becomes bankrupt, or
your buy is defective or doesn't turn up, you won't miss out in light of the fact that you can
guarantee the cash once more from your charge card supplier. You'll likewise have assurance if
your card is utilized deceitfully as your card supplier should discount the cash. This won't work
however on the off chance that your card supplier finds that you were careless so ensure you
don't compose your PIN number down anyplace.

You can purchase by using credit cards without interest. Some credit cards offer 0% periods
meaning you can successfully profit by an intrigue free credit. You have to make the payment
base regularly scheduled installments however, and clear your equalization before the 0% offer
finishes however else you'll be charged intrigue. Normally, the interest of a credit card is quite
high, which is the reason why you should pay your obligation off before intrigue kicks in. Not
every person needs an all-encompassing sans interest period, but rather regardless of whether
you pony up all required funds every month, despite everything you'll acquire for nothing.
Financial records quote that you get up to 59 days intrigue free, this truly implies as long you pay
off your bill completely by the due date, you won't be charged intrigue. This can be an
extraordinary help in dealing with your income.

Furthermore, a few cards even offer motivating forces to spend, for example, cash back, loyalty
points or air miles, which implies you could really profit from your credit card. These are just
advantageous on the off chance that you pony up all required funds. Generally, the intrigue you'll
be charged will be more than the estimation of the prizes.

In the event that you owe cash using a loan or store cards, taking out another card could really be
a decent choice. You'll most likely be paying financing costs of in any event 18%, however you
could slice that to zero by exchanging your obligation onto a 0% balance exchange card. There
will be an exchange expense to pay of around 3%, however it's generally justified, despite all the
trouble as it will in any case be not exactly the intrigue you'll be accused on the off chance that
you stick of your current card. Guarantee you pay your obligation off before the finish of the 0%
period however as you will at that point be charged enthusiasm on any obligation despite
everything you have. You can utilize our Eligibility Checker device to discover that you are so
liable to get acknowledged for each card.

Credit cards can likewise be valuable in the midst of crisis. While you ought to abstain from
spending outside your financial plan or when you do not have any cash with you, some of the
time crises may prompt a substantial buy such as car breakdown.
DISADVANTAGES OF CREDIT CARDS

It's vital to recollect that a charge card is a type of acquiring. You purchase now and pay later -
and there are dangers. In the event that you don't satisfy your equalization in full every month,
you will begin to pile on intrigue. Your obligation can accordingly rapidly be winding crazy,
especially in the event that you pay off just the base month to month sum. You should therefore
try to pay more than the month to month least and you should think about your credit card just as
a transient getting office. You can discover how your equalization is influenced by changing your
month to month reimbursement sum with our charge card adding machine.

Besides, the loan fee isn't the main expense of a charge card. An expense will be charged on the
off chance that you are late making your regularly scheduled installment, or miss it through.
You'll additionally pay a punishment in the event that you surpass your credit limit. So ensure
you monitor your spending and dependably pay your bill on time. Also, don't be tempted to take
out money on your credit cards. Most card firms charge an expense to take out money from an
ATM, ordinarily about 2%. You will likewise begin to pile on premium quickly as there is no
premium free period on money withdrawals.

Ensure that you pick the correct card else you could wind up paying more than you require. On
the off chance that you have a costly time coming up, perhaps you're moving house or arranging
a wedding, you should search for a 0% buy card. In the event that you require another card since
you've developed costly obligations on another Visa, it's a 0% balance exchange offer you
require. Then again, our convenient credit cards choice tree will enable you to work out which
kind of card is most appropriate to your spending

Moreover, like cash, at times credit cards can be stolen. They might be physically stolen on the
off chance that you lose your wallet or somebody may take your credit card number and utilize
your card to pile on unpaid liabilities. Fortunately, in contrast to money, in the event that you
understand your credit card or number has been stolen and you report it to your credit card
organization quickly, you won't be charged for any buys that another person has made.
Regardless of whether you did not realize your credit card number has been stolen
BENEFIT OF CREDIT CARDS
Credit cards can be thought of as plastic money. Issued by financial institutions (mostly
banks), they offer money (credit) that needs to be repaid within a stipulated time. Credit cards are
a handy way to make payments and keep a record of your purchases. All you need to do is swipe
your credit card online or at retail stores and you are done. Many also use these cards to pay
monthly bills and insurance premiums.

Besides being convenient, there are other benefits of using credit cards too.

1) Cash back: Many banks offer cash back opportunities if you use your card to pay monthly
bills (electricity) or for grocery purchases. Besides, online shopping portals too have cash back
offers on various products.

2) Reward points: Credit card companies offer reward points for any purchases you make with
your card. For example, HDFC Bank gives 2-5 reward points for every Rs 150 spent using your
card. You can then use these points to purchase gifts (available on the company’s rewards page).

3) EMIs: If you are making a big-ticket purchase (TV, refrigerator, laptop), you can easily
convert it to affordable monthly instalments. Banks usually charge interest for conversion to
EMIs.

4) Grace period: One of the main advantages of using a credit card is you can defer your
payments till your bill your due. Banks offer a maximum 50-day grace period for paying back
your dues.

5) Safety: Credit cards are safer than debit cards as in case of fraud you are not out of money
immediately. Payment gateways like Visa, MasterCard also offer additional password protection
while using the cards online.
 When used responsibly, credit cards can be valuable tools for earning rewards, traveling,
handling emergencies or unplanned expenses, and building credit.

A rewards credit card does exactly what its name implies: rewards the cardholder for making
purchases. Rewards can vary by issuer and card type. Some rewards come in the form of cash
back, discounts on gas station purchases, and even travel miles. For those who use their cards
regularly, earning rewards is one of the primary advantages of credit cards, as cardholders can
redeem them for things they were going to purchase already as well as the occasional treat.

Credit cards can also be beneficial when traveling. This is because some major car rental
companies and hotels require a hold on a credit or debit card to reserve a vehicle or book a room.
This procedure can take several days or longer. During this time, the amount of the hold on either
a credit or debit card is not available to use. Because you may not have the necessary funds in
your bank account, credit cards increase your purchasing power, providing you with the required
funds at the time they are needed.

Some credit cards offer fraud alerts to serve as a safety net if someone experiences a theft of
their card or information when traveling. In the case of potentially fraudulent activity, an alert
may be sent via a phone call, email, or text message, and the transactions can be stopped.
Because a credit card isn’t linked to a checking or savings account, there is less risk of the thief
gaining access to the money in these accounts.
DIFFERENT CREDIT CARD AND DEBIT CARD

Definition of Credit Card:

A credit card is a type of facility which allows its customers to purchase goods and services
on credit, and the payment is made by a third party (financial institution) on his behalf
immediately. The customer has to pay the credit amount to the third party at a later date. In this
regard, every month, the financial institution sends a bill to the card user for the amount paid on
his behalf. Usually the user is allowed a credit period of 30 days within which he can pay the
amount, afterwards, interest is charged at a prescribed rate.

Definition of Debit Card:

A debit card is a type of facility provided by the banks to its customers to purchase goods and
services against his own saving bank account. So, whenever the transaction takes place, the
amount is deducted from the customer’s account. Here, the bank charges a nominal amount
every month for the use of the card. It can be used for purchasing goods, transfer of funds,
internet banking services, deposits, etc. Nowadays, ATM cum debit card is also available in the
market which allows you to avail all the facilities of the ATM card.

The difference between debit card and credit card is same as debit differs from credit. Debit
means ‘deduct’ and so when an individual makes use of debit card, he is deducting money from
the bank account linked to the card. The individual is able to spend that much amount of money,
which is present in his bank account and not more than that. A debit card is like a cheque, from
which money is subtracted from his/her personal savings/current account.

Conversely, credit refers to money received as a loan by the bank to the customer, which
should be repaid, with interest on a later date. Credit history, paying capacity, income and debts
are the parameters which determine the amount of credit. When one makes use of a credit card,
he is actually taking a loan from the issuing bank, which requires repayment along with interest.
COMPARISON CHART

BASIS FOR
CREDIT CARD DEBIT CARD
COMPARISON

Meaning Credit card is issued by a bank or Debit card is issued by a bank to

any financial institution to allow allow its customers to purchase
the holder of the card to purchase goods and services, whose
goods and services on credit. The payment is made directly
payment is made by the bank on through the customer's account
the customer's behalf. linked to the card.

Implies Pay later Pay now

Bank Account The bank account is not The bank account is a must for
prerequisite for issuing a credit issuing a debit card.
card.

Limit The maximum limit of The maximum limit of

withdrawing money is determined withdrawing money will be less
according to the credit rating of the than the money lying in the
holder. saving bank account.
Bill The holder of the card has to pay the There is no such bill, the amount is
credit card bill within 30 days of every directly deducted from the customer's
month. account.

Interes Interest is charged when payment is not No interest is charged.

t made to the bank within a specified time
period.
HOW TO CALCULATE CREDIT CARD DEBT

If you only make minimum payment, you will take longer to complete the credit card debt and
more debt will accumulate. The high interest rates, you pay more to credit card issuers than the
original price of the goods or services you earned first.

The following illustration show the repayment amount of interest charged if you only make a
minimum payment of 5% per month.

OUTSATNDING RM1,000 RM5,000 RM10,000

BALANCE
INTEREST RATES 17.5% 17.5% 17.5%
PAYMENT 2.0 5.8 7.3
PERIOD (YEAR)
AMOUT RM191 RM1,838 RM3,897
INTEREST
CHARGED

As the tale above, if the balance of the loan is RM10,000, you will take 7.3 years to settle your
entire debt. In addition, you also required to pay RM13,897 for a fee which initially amounts to
only RM10,000.
CONCLUSION

When we talk about credit card, it will have a negative impact and positive impact to the
consumer. Consumer think that using their credit cards for online shopping or other necessary
thing they might need to buy is a good thing, but they are actually wrong because is a bad thing.
But credit cards also have the advantages of making it easier for users to buy something. But
they must distinguish which needs and wants.

Cconsumers need to be smart in managing their finances especially when using credit cards.
Because if the user fails to settle the bill then the bill will increase significantly. When
consumers default on credit card payments, you are charged with late fees and interest increasing
your debt load. It is not wrong to use a credit card, but the user must be smart and make
payments right at the specified time that they must pay. Credit card users must be disciplined.

Think before you want to use credit cards because there are many negative and positive
effects. If you do not make payments on time, the amount of your debt will increase and
increase.