A Personal Finance Blog for Malaysian: Do NOT Do This When You Finally Have Your First Credit Card

Friday, October 11, 2013

Do NOT Do This When You Finally Have Your First Credit Card

You finally got your first credit card. Hooray! You will find having a credit card on hand extremely convenient, especially for some much-needed emergency spending.

However, you don’t want to end up like many less conscientious credit card holders who ended up spending years of their life trying to pay off credit card debts. To use it well, you can probably check out this guide about credit cards. Also, before you head out to go shopping, take to heart my own list of credit card habits you best avoid.

DON’T:

1.    Give your PIN to anyone. In Malaysia, credit cards may be used to withdraw cash from ATMs. Don’t  tell anyone your PIN code or even write it down where there’s a chance someone might find it. Criminals have been known to go through people’s trash to get credit card information – and many of them actually succeeded.

2.    Leave your credit card lying around. Your credit card must be kept in an absolutely secure place at all times. In the event that your card gets lost or stolen, report it to your credit card issuer immediately.

3.    Use your credit card as a substitute for cash. Of course you are already aware of interest rates. It’s how the banks or credit card issuers profit from extending you a line of credit; so in theory, the more you spend the more they earn.

4.    Make purchases beyond your means. If you need to buy a new phone, choose according to your budget and needs. Even if you can, don’t just go for the most expensive plan unless you really need it. If possible, save the use of your credit card for very important purchases.

5.    Use the card for purchases that are too small. If you get into the habit of using your card for the smallest of purchases, it can add up fast. Don’t start the habit.

6.    Sign a blank receipt. As a security measure, draw a line through blank spaces above the total amount before you sign whenever you make any purchase using your card.

7.    Be late in paying your bills. I cannot stress enough that late payments can cause you a lot of accumulated interest – and inconvenience – in the long term. Plan your payments accordingly to avoid getting yourself in deep financial trouble.

8.    Carry over a balance. Settle as much of your monthly balance as you can. The quicker you finish paying off your debt the less you pay on interest.

9.    Apply for more credit cards. One card is already too much responsibility. If you need to apply for another one – or two – see  to it first that you can prove yourself a responsible credit card holder. Besides, if you show a spotless repayment record on  your first card, other credit card issuers in Malaysia would be more than glad to issue you more credit cards (so they could earn more!).

10.  Max out your card. Always going above your credit card limit can have a negative impact on your credit score. Keep your balances low and stay well within your limit.

Michael Vincent writes this article for Compare Hero, Malaysia's leading credit card comparison website, for AskChong.com.