Credit Card Education

Know about credit

Understanding credit cards

Credit cards allow you to make purchases up to certain credit limits. Your balance (the total amount you owe on the card) may not exceed that limit. You will be billed every month, and at that time you must pay at least the minimum payment highlighted on your bill. However, you always have the option of paying more than the minimum, or even the entire balance, without a prepayment penalty.

It is best to pay off as much of the balance as you can because credit card companies bill you monthly and impose a finance charge on the unpaid balance. Interest rates and fees vary widely, and there is often an annual fee. You can also get cash advances on most major credit cards by presenting them at any bank or ATM that honours them. Many major credit cards also offer 24-hours customer service over the phone or Internet.

Your monthly statement is an excellent source of information about your credit card account.

Your credit card statement is a summary of your account at the end of each statement period. It shows what you owed at the start of the billing period, what you owe now, and every charge and payment that you made during the period.

Though the statement isn't designed to help you evaluate your spending habits, you can use it for that purpose. If you're trying to find ways to cut expenses or set aside more for investment, you can track money you're spending on optional items. Instead of spending all of it, you might consider putting a portion of the money into investments or savings.

All statements contain virtually the same information. If you know what the terms mean and how they affect what you can spend and what you will pay, you can use credit wisely. Some of the terms are as follows:

Statement balance is the amount you owed on the day the statement was prepared. It includes any finance charges and late fees.
Credit limit is the amount of credit you can use.
Previous statement balance is what you owed on the day your previous statement was prepared.
Minimum payment due is what you must pay. Typically you are required to pay 5% of the new balance or RM50, whichever is greater. Whatever is in excess of the minimum payment due and is not paid will be carried forward and subject to finance charges.
Payment due date is the last day your payment can be received to avoid additional finance charges or late payment charges.
Cash advance is money you can withdraw with your credit card. You need a personal identification number (PIN) to use an ATM.
Statement date is the date the statement was prepared. Any charges to your credit card after this date will appear on the next statement.
Finance charge is the interest charged on the outstanding balance after the payment due date.
Transaction details are records of the purchases and cash withdrawals you made, giving dates and details for each. Check these details against your records to be sure that the charges are all yours.
Late payment charge is the charge imposed if you fail to make the minimum monthly repayment by the due date.