Yo, bro and sis! It is either you love it or hate it as far as credit cards are concerned. On the one hand, they are incredibly helpful for the person who tends to shop online without thinking. On the other hand, they can turn into a financial disaster if you do not exercise a lot of caution. This, therefore, raises the question – is it time to get rid of the plastic or should one continue to use it? Now, let’s analyse the advantages and disadvantages of credit cards in Malaysia.
Let me outlines the pros of having and using your credit card.
1. Convenience, Bro!
Credit cards are the perfect example of having one tool that can do the job of many. These are accepted almost anywhere be it in your favorite Mamak stall or in online stores across the globe. You don’t have to walk around with a roll of money or stress about getting the right amount to give.
2. Rewards, Points, and Cashback
Doesn’t everyone like freebies? Most credit cards give you rewards, points, or even cash back for the purchases that you are making. From flying miles to spend on your next vacation or cash back on purchases as simple as groceries, these benefits become valuable if you use your card correctly.
3. Build Your Credit Score
It is important to note that when you use your credit card properly then you can actually build your credit score. This is especially so if you are planning to take a loan for a car, a house or any other big purchase. The only thing to watch out for is that you don’t carry a balance on your card each month.
4. Emergency Fund Backup
Emergencies don’t come with a warning signs. A credit card is a plastic card which allows you to get cash as and when you require it, when you have run out of savings. Bear in mind, however, that it should be used only in genuine emergencies and not, for instance, to buy a new iPhone.
5. Purchase Protection
Most credit cards have purchase protection in their features as one of the ways of protecting the cardholder. If an item that you purchase gets damaged or gets stolen a few days after purchase, then your credit card company may refund you for the repair or replacement costs. It is like having an insurance when shopping for your goods.
The following are some of the disadvantages of having your credit card.
High-Interest Rates
Credit cards are one of the most pricey when it comes to the interest rates, which may be more than 15-18% per annum. If you don’t clear the balance in your credit card at the end of the month you may end up paying way more than the price of the item.
Temptation to Overspend
It is very fashionable nowadays to pay and think about the consequences later on in life. That’s the problem. The use of credit cards is also another way through which one is likely to be tempted to buy things which they don’t require or which they cannot afford to buy. This leads to debt which is very difficult to repay and which can accumulate within no time.
Fees, Fees, Fees
There are several fees that a consumer might be subjected to when using a credit card including the annual fees and late payment penalties among others. This thing is if you are not careful these fees can outweigh any benefits you are getting from the card.
Risk of Debt
Another common financial issue that can be identified in Malaysians is the credit card debt. It is very possible to get into the habit of only paying the minimum amount which is just enough to cover for the interest. This can lead to years of debt, stress and financial trouble which is no fun at all.
Effects on Credit Rating
On the positive side, proper use of the credit card to meet the outstanding balances can help in improving your credit score while on the negative side poor use such as missing payments or using high balance can affect your credit score negatively. A low credit rating will be a drawback when the time comes to apply for a loan as well as if one is granted the loan, the interest rates will be on the higher side.
Should You Ditch Your Credit Card?
That fully depends on the financial activities you have with the money. In fact, if you have self-control when it comes to spending, are able to clear your balance as frequently as possible, and want to take benefit of the rewards, a credit card is a versatile instrument. If you are buried in debt or you unconsciously find yourself spending more than you should on credit, then you would benefit from leaving the credit card in the dust bin in preference for a debit card or going cash-less.
