Why are people so scared when it comes to credit cards? We similarly hear tons of stories about the people we know, people we don't know who have fallen into the credit card trap and are stuck in it. A credit card is not your typical regular loan like a fixed rate of interest or a tenure where it needs an agreement. A credit card is a line of credit where you are using somebody else money for yourself (credit), which needs to be settled by the end of a cycle, or else a heavy interest penalty will come knocking at your door. The main question here is, does credit card causes people to get stuck into a debt trap?
Based on the Department of Insolvency Malaysia (MDI), the statistics show the numbers of bankruptcy among the local citizens from 2015-2019 are 84,805, with Personal loans (32.07%) being the top of the list, followed by Car loans (21.53%), Housing loan (12.57%), and business loan (10.15%). On the other hand, credit cards are on the fifth in the list with only (10%). These show that credit card is not the main reason leading people to bankruptcy while it has always been the loans leading throughout the decades. Click here for more information regarding bankruptcy in Malaysia.
According to the Minister of Finance Tengku Datuk Seri Zafrul Abdul Aziz, 40% of millennials are spending beyond their means. He also mentioned that 47% of Malaysian youths have high credit card debt. Based on the statements, it seems that credit card does have a bad reputation as it involves many people turning into a debt trap. However, the statistics shown above do say the opposite. The finance minister critically said, "it's not the credit card fault, it's the one who uses it." Having a credit card does give you many privileges if it is used correctly.
Leave your credit card in good hands
Credit cards do have many advantages which people might oversee. A credit card can help you manage your cash flow better, build credit, earn rewards, and access benefits you might not otherwise have. Credit cards can help you make important purchases at times, during the month when you may not have the cash to pay directly.
As long as you pay off your balance on time each month, you won't owe a single cent of interest. Moreover, credit cards allow you to charge now and pay them off later, as it comes with a 40 to 50 days free credit period, although getting in the habit of doing so is not a good idea.
It also helps you build your credit history. Is it important? It's important because when you try to apply for a loan in the future, the lender would be aware of your credit history, and if it's good, you can negotiate a better interest rate with them. Interesting in finding out how you can build a better credit score? Click here.
With jomSETTLE™, you can now pay all your business overhead such as rental, supplier invoice, staff salary, and many more using your credit card. jomSETTLE™️ only charges a one-time minimal transaction fee per-use with no commitment and hidden fees. If it is used correctly, jomSETTLE™️ allows you to stay afloat with your cash reserved by leveraging your credit card without incurring actual new debt.
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