Everything You Need To Know About Credit Cards
Got questions about how your credit card works? We break it all down for you - from annual fees, credit scores to how to choose a credit card that suits you best.
What is a credit card?
A credit card is a plastic card supplied by a financial payment solutions company (Visa, MasterCard, AMEX, etc.) and issued by credit services providers (normally banks) which offers a 30-day short-term loan to purchase goods or services on credit.
Why should I get a credit card?
Having a credit card can open a door of opportunities. Here are four benefits you stand to gain from having one:
Not only can credit cards offer you the convenience of cashless shopping, but the financial flexibility of a monthly instalment plan especially for big ticket items. On top of that, credit cards can provide a balance transfer facility which allows you to consolidate your debt into just one payment.
Earn flights, points, cashback, and more just by doing your everyday spending. Most credit card providers allow you to convert your spending to airmiles, loyalty points, or cashback which you can use to treat yourself and your family to even more rewards.
Each credit card comes with its exclusive privileges. Some offer free travel insurance for the avid traveller, while golfing enthusiasts would benefit from exclusive access and reduced green fees at golf courses worldwide.
Promotions & Discounts
Unlock a host of exclusive promotions and discounts that are only applicable when you swipe your credit card. From special dining deals to delightful holiday packages, these are only applicable to credit card holders.
What are the different types of credit cards available in the market?
There are three major credit card suppliers in Malaysia: Visa, MasterCard, and American Express. While American Express may offer higher treats points or cash rebates, it is not widely accepted by many merchants due to the higher charges charged to them. Please refer to the chart below on the differences between these three cards in Malaysia.
|Card Supplier||Visa||MasterCard||American Express|
|Customer Service||24-hour multi-lingual assistance||24/7/365 services incl. emergency assistance||Online|
|Contactless Facility||PayWave||PayPass||Not available in MY|
|Payments/ Transfers||Net banking, mobile or ATM with 16 digits||MoneySend (P2P) in 2 banking days||Direct debit or bank transfer|
|Online Payment Security/ Fraud Protection||Password/3-digit security code via mobile text message||Code 10 Authorisation – independent approval for each transaction||Billing zip code / card security code, auto time-out for 10 mins inactivity|
|Accessibility||Instant cash access at over 1.9mil. ATMs worldwide||Instant cash access at over 32mil. ATMs worldwide||Cash access at over 1.2mil. ATMs worldwide|
|Promotions||Travel, Dining, Shopping||Travel, Dining, Shopping||Travel, Dining, Shopping|
|Mobile app||Visa Explore||MasterCard Nearby||Amex Mobile|
As you can see from above, both Visa and MasterCard offer a comparable level of service with nothing much to distinguish between them. Rather than choosing based on brand, it is wiser to make a credit card choice based on your budget, requirements and level of services or benefits provided by the banks.
You might find some cards with a combination of the following types of benefits.
|Card Benefit||Points Rewards||Cash Rebates||Air Miles|
|How to Earn?||Accumulate points towards a reward structure based on card usage over time||Higher rebate percentage with increased usage in specific categories||Accumulate miles/points based on flights you buy with the card|
|What do you get?||Redeem from a wide range of premiums listed||Automatically debited into your credit card account||Redeem round-trip flights (via associated airlines) for free|
|For whom?||Individuals who enjoy the gift redemption system||Individuals who prefer maximising cashback by spending||Frequent air travellers|
Note: A basic card does not come with the benefits above, only with other credit card financial benefits found in Section 6 below
Islamic Credit Cards
These types of cards have a few minor differences apart from Shariah-compliant transactions and rewards. Non-Muslims are eligible to apply too.
Do credit cards work similarly to debit cards?
There are several major differences between credit cards and debit cards as highlighted in the table below.
|Card type:||Credit Card||Debit Card|
|Overview:||30-day loan for purchases||Linked to bank account|
1. Wireless transactions for payment convenience
2. Merchant deals and validities
|1. Supplier||Visa, MasterCard, AMEX||Visa or MasterCard|
|2. Issuer||Credit card service providers||Banks|
i) Min. age
ii) Min. income
21 years old (principal)
Depends on account
Depends on account
|4. Facilities||Balance Transfer, Cash Advance, Instalment Plan||Instalment Plan|
|5. Fees & charges||Annual fee, waiver||RM 10 per card replacement|
|6. Others||Credit score, stable job||Alternative for poor credit|
Are there any promotions when signing up for a credit card?
Yes, there are! For new credit card sign-ups, there is always a sign-up benefit waiting for you. It can be freebies, cashback or better reward rates for the initial period when you start using your credit card. Choose the credit card that delivers you the most valued benefits!
What are the financial benefits credit cards offer?
Balance transfer is a plan which allows you to transfer all your credit card debts with other banks into a credit card with another bank which you do not have any debt with. This may incur a transfer fee or service fee to the new bank. Usually, you will enjoy a lower interest rate for the transferred amount or even 0% interest rate. Depending on the bank, this plan offers you six to 36 months to clear your total outstanding balances.
For retail purchases above RM 500 (can vary across merchants), you may enjoy interest rates as low as 0% on monthly instalment bills from certain banks for a minimum of six up to 36 months. The card however, cannot be cancelled until the total amount due has been repaid.
Urgent cash withdrawals via ATM, up to approved credit limit. To enable this feature, you need to activate this function with the bank and acquire a six-digit password to use the ATM. Note that higher cash advance interests and fees may apply.
Complimentary coverage with credit cards
Enjoy complimentary travel insurance up to RM 2,000,000 for selected credit cards. You may or may not need to charge your air tickets to your credit card.
Airport Lounge Access
Exclusive credit cards provide limited or even unlimited free access to local and international premium lounges annually. You will be issued a lounge access card or vouchers, which you will be required to present when you wish to access a lounge at the airport. You may also be entitled to discounts of up to 25% for each accompanying guest.
Limited, complimentary rides to the airport is offered if you hit a certain amount of spending in a year or quarter. You will need to make an advanced booking with the bank and of course, show some courtesy by not letting the driver wait for more than 15 minutes!
Enjoy golfing discounts or complimentary green fees. Book your tee time ahead through the bank concierge.
Apart from coverages i to iv above, some banks may offer you a complimentary Touch’n Go Zing Card with auto-reload services or lower interest rates for personal loan applications. Not limited to these, there are many more privileges that you stand to benefit from.
How do I choose a credit card?
Get to know your spending behaviour
Are you familiar with how you spend your money?
- If you are a frequent overseas traveller, a travel reward credit card which offers air miles redeemable for free flights would best suit you
- Shopaholics or even grocery buyers may want to look for a card with high rewards on shopping for both retail and online
- Foodies would benefit from choosing a credit card that provides exclusive 1-for-1 or big dining discounts
- If you frequently indulge in your hobbies and entertainment such as going to the movies and leading the café life, a lifestyle credit card would be most suitable for you
- None of the above? You can still use the credit card for all normal spending. Take note that the higher the income requirement for the credit card, the higher the rewards rate will be
Understand the common fees and charges
|Annual fee||Depends on card benefits, can be free or with waiver criteria|
|Min. monthly payment||Min. RM50 or 5% of outstanding balance, whichever is higher|
|Late payment||RM10 or 1% of total outstanding balance whichever is higher (excl. interests and fees as at statement date), up to RM100|
|Cash advance||5.3% of cash amount and 18% p.a. daily interest|
|Balance transfer||Depends on bank, as low as 0%|
|Instalment plan||Depends on bank, as low as 0%|
|Interest free period||30 days from statement date and applicable only to cardmembers who pay in full or before payment due date|
What else should I know before choosing a credit card?
All credit card providers have a set list of criteria to consider for each credit card applicant. For example:
To be eligible for a Principal credit card, you have to be aged 21 or above. Students between 18 to 20 years old can only opt for a Supplementary credit card because a Principal card applicant must be able to show proof of income (read more below).
The lowest annual income requirement in Malaysis is RM24,000 or the equivalent of RM2,000 per month on gross pay before most fresh graduates or young adults can afford an application. When you have the financial ability to fulfill higher income requirements, you may then consider credit cards with greater rewards rates.
Your existing debts and repayment behavior will be examined. This is especially important for experienced working adults above the age of 25 who may already have a credit card, student loan (such as PTPTN), car loan or home loan.
- Prepare supporting documents for verification of personal details
- Apply online or offline
- Be updated for the card approval status
- Card activation upon receipt with given instructions, complete within minutes
Make prompt repayments to avoid late payment charges or finance charges and maintain a good credit score for future applications of financial accounts.