Do we really need a credit card?

By Chee Jo-Ey

IN my line of work, I’ve had the opportunity to speak with many financial gurus varying from investment bankers to fintech players. I consider this one of the biggest perks of my job.

Being a newbie, every word was gold and insightful but it was my encounter with a CEO of this particular company that struck me the hardest.

To give you a bit of background, he owns a company based in Singapore that uses board games to teach financial literacy. We had arranged to meet at one of those coffeehouse chains so he could grab a bite to eat before travelling back to the island-republic.

After making our orders, he proceeded to take out from his pocket a tiny plastic bag containing a couple of rolled-up 10 ringgit bills. He said something along the lines of “I set a budget for myself every day to keep track of my spending”.

In a growingly cashless society where almost everyone owns a credit card with some swiping without much thought, I was blown away by this breath of fresh air.

When you spend with cash, you feel the pain with every ringgit you use. The pain I feel physically taking out cash notes from my wallet makes me think twice about my spending.

With a credit card, you just swipe and go, which is very convenient indeed but also increases the risk of getting into debt.

I have seen friends swipe their cards any chance they get (even for a cuppa at Starbucks).

Credit cards are promoted everywhere in shopping malls (ever wonder why?) but proper education on its usage is insufficient.

Requirements to be a principal cardholder is just a minimum age of 21 and a minimum income of RM24,000 per annum.

There are fees and charges users need to be aware of before getting a credit card. Did you know that an issuer may impose a late payment charge for payments not received after the due date?

A check on Public Bank’s website shows that a finance charge of 15% per annum applies to card members with prompt payments for 12 consecutive months.

If you fail to make a minimum payment by the due date, a further charge of a minimum of RM10 or 1% of total outstanding balance as at statement date, whichever is higher, capped to a maximum of RM100, shall be debited to the card account.

Even a small misstep (paying late by a day or two, or paying only the minimum amount when it falls due) can set you back financially.

Imagine having to pay late payment charges for a cup of Starbucks.

I personally try not to get into the habit of relying too heavily on credit cards. I am, however, not saying that we should shun the plastic money altogether. 

A credit card can be useful, but only if it is used for convenience or during an emergency like a laptop breakdown or car troubles. Rule numero uno is to make sure you educate yourself on the charges involved and how to always stay on top of things.

It should not be regarded as a licence to buy extravagantly first and pay later but more as a backup or tool when the unexpected arise.   

If cash is troublesome, you may consider the e-wallet or debit card which may be safer alternatives for those who find the credit card monitoring discipline too complex. 

For those who find keeping track of their spending difficult or feel that their spending can get out of hand most of the time, it might be best to avoid these plastic cards altogether. – Feb 12, 2020

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