Of Credit Card Limits and Malaysian spending habits

Starting Jan 2012, Bank Negara will impose new rules to credit card usage. This is to manage the debt of credit cardholders earning RM36,000 and below per annum.

Below are the rules:

1. The maximum credit limit extended to a principal card holder in that category cannot exceed twice the holder's monthly income (RM3,000 x 2) per credit card issuer. 
2. They will only be allowed to be a principal card holder from a maximum of two credit card issuers. Combined credit limit will be capped at RM12,000.
3. They have 24 months to repay the outstanding balances on their cancelled credit cards, if they have more than 2 cards.

Bad news: Debit Card Fees

If your bank need to charge you an annual or monthly fees for the debit card you own, what would be your first reaction?

Absurd.

The Good News: That is what just happened in US.

Apparently, Bank of America will start charging debit-card users $5 a month if they use their debit cards for purchases in any given month, starting next year. The fee will not be triggered by transactions at automated-teller machines.Paying to use a debit card was unheard of before this year and is still a novel concept for many consumers.

Lesson 2: APR - The Real Cost of Credit Card Annual Interest Rate

Read the basic difference between APR and AER before continue reading the below.

Refer to the annual interest charges for Maybank credit cards.

Assume you are one of those who constantly spend more than you earn and frequently misses your payment, putting yourself in Tier 3 bracket of 17.5%.

Say, you have outstanding balance of RM 10,000, so you'll think (I did previously) that, even if I don't pay a single cent for the next 12 months, by the 13-th month, I would need to pay 117.5% x 10,000 = RM 11,750. Or, you think, every month, I will be charged a monthly interest of 17.5% /12 = 1.4583%

Not quite that simple. Confused? Let's solidify the concept with an example below.

Remember, you get your credit card statement monthly - your outstanding balance plus interest incurred previously will be carried forward to the subsequent month. That means, the compounding period is monthly!