Credit card : Bye-bye 20 Days Interest-Free Period

From smartconsumerbanking.com

RM2.70 is already a reality, like it or not! But luckily, like a small consolation, you have one of those petrol rebate credit cards. But with the domino effects, very soon, cost of living will increase. If you live in a city, the inflation will be more than the 5% government projected.

And if you think you can count on the credit cards to ‘roll-over’ the short-falls, but before you do so, take a look at the following new changes on credit card:

Interest-Free Period
Effective this July, the good old 20 days interest-free period provides by credit cards will only applicable to those who make full payment before the due date. Those with carry forward balance and not paying on-time will be charged with the interest the day the new purchase is made. In short, the interest-free period is provided only to those paid in full and on-time.

Late Payment Charges
But there is more! The new late payment charge is now based on total outstanding amount, not minimum monthly payment anymore. The new late payment charge increases to RM10.00 or 1% on total outstanding balance, from 1% or RM5.00 of the minimum payment amount. That means if you have an outstanding balance of more than RM1,001, you would starting to pay more than the minimum RM10.00.

Annual Interest rate
First announced 12 months ago by Bank Negara Malaysia (BNM), comes this July, the tiered pricing structure (TPS) will be implemented where the annual interest rate reduced – for those good and prompt payment cardholders, 15% to 17% per annum (pending their payment history over a 12 month period), instead of the 18% previously.

Conclusion

So what do all these means? Let’s look at the following scenarios:

Those with monthly outstanding balance who made prompt minimum payment

No 20 days interest-free period but enjoys a lower annual interest rate of 14% – 17% of the outstanding balance. No late payment charge.

Those with monthly outstanding balance and failed to pay the minimum payment on-time

Late payment fee of RM10.00 or 1% charge on the total outstanding balance; 18% interest rate on total outstanding balance; no 20 days interest-free honey moon.

Those that made full payment on time every time

Enjoy a lower TPS asl low as 14% per annum

You see, banks won’t just give-up easily; they give you a lower annual interest rate (TPS) but at the same time, they cancel the interest-free period and increase the late payment charge.

Bottom line, don’t use your credit card simply because you can afford the minimum payment. Better still, don’t use the card if you do not have the money. Cardholders who cannot be prompt in paying the minimum payment will be paying more than before.

Finally, If you are the reward points/rebate chaser, pay close attention to the outstanding amount.