DISCOVER the Road to Financial FREEDOM!

Good news to Credit Card users! 😀

Now we can enjoy Attractive Credit Card interest rate at 9% per year which is the lowest in the country.

The higher the amount of interest your Credit Card charges will cost you more for a simple purchase and ultimately may take you more years to clear off instead of months, should you make the minimum payment.

While the Credit Card can be very useful, it also work like double-edged sword which often to the Source of Serious and Much Financial Problems.

The Killer when You do NOT pay in Full!

 

Normally The Finance charges range from 15% to 18% per annum based on payment Record.

If the bank charge 1.25 percent interest per month(which sounds very little), that is 15 percent interest per year(Which is a Lot of Money)

Just compare what You get when putting Money in A Fixed Deposit and the Interest is about 3 percent interest per year!

3% vs 15%

Do your own Math Calculation!

That is 1:5 Margin Ratio!

I do Not know any single Business that can Mark Up the Price to Five times on the Goods!

If I can Mark Up to Five times, I will promote it like Crazy! 😀

Now you know why the Bank give you pre-approved Credit Card even you do  NOT ask for it!

Wonder why the Credit Card sales personnel keep offering you attractive FREE gift to lure on  new Credit Card sign up

How to get the Lowest Credit Card Interest Rate in the Country?

Get American Express Gold credit card from Maybank which offer attractive  interest rate at 9% per year, the lowest in the country.

Please take note that Credit card is one of the top, fastest and most profitable way for the banks to quickly enslaved their customers with high interest rate.

Therefore, use it Wisely & be the Master and not the Slave!

More tips on Handling Credit Card at Credit Cards… A Powerful Wealth Tool!

*** SO USE YOUR CREDIT CARDS WISE & DO NOT  FALL INTO CREDIT CARDS DEBT.

Don’t forget to pay your credit cards’ bills before the due date.

Interesting articles on Credit Card:

———————————————————————————–

Banks should consider risk factor before lowering credit card rates

Price war concern

By DALJIT DHESI

PETALING JAYA: The move by Malayan Banking Bhd (Maybank) to offer the lowest credit card interest rate in the country may spark a price war among banks, but any such move should weigh the unsecured risk factor of such instruments, analysts said.

Competition will heat up as the credit card business is lucrative due to the high interest rates involved, according to a senior banking analyst with a research house.

“Before jumping onto the bandwagon in lowering rates, they should price their risk accordingly since the credit card business is a risky one and is unsecured or non-collateralised,” the analyst said. “They should be mindful in this regard, and take the cue from some of the banks in the US that have collapsed by taking such an action.”

Due to the higher-risk element, credit card loans currently make up only slightly more than 3% of the banking system’s total loans portfolio.

Another banking analyst from a leading investment bank said industry players were competing for a larger slice of the credit card pie and some of them were strategising to offer attractive rates, apart from offering special promotions to spice up sales.

The move was also in line with the call by Bank Negara to lower interest rate charges, he said, warning that whatever actions taken by banks to lower credit cards rates should weigh the uncollateralised risk factor as this may have damaging repercussions for banks.

Maybank had last month launched the American Express Gold credit card with an interest rate at 9% per year, the lowest in the country.

Vipin Agrawal … ‘current domestic credit card interest rates are acceptable’

Prior to this, the lowest rate was 9.9% per year offered by Affin Bank Bhd.

Maybank is the sole issuer and manager of the American Express charge card in Malaysia since acquiring American Express’ business operations in the country on Aug 1, 2006.

Effective March this year, the interest rate on outstanding credit card balances was reduced to between 0.5% and 1.5% while late payment fees were slashed to a minimum of RM5 (from RM10) and a maximum of RM75 (from RM100). The maximum late payment fee has since been cut to RM50 effective July 1.

Citibank Bhd business director for cards and personal loans Vipin Agrawal feels the current domestic credit card interest rates are acceptable as the rates are among the lowest in Asia, compared with 18% to 42% elsewhere in the region.

“This is a significant cost item for banks since credit card outstanding (balances) are not secured against any collateral.

“In providing credit card facilities, banks also have fraud risks (counterfeiting and credit card scams), infrastructure costs, administration and customer services costs,” he said.

Agrawal reckoned that any further reduction in interest rates would make it difficult for banks to give credit to lower income customers who tend to be a higher credit risk.

Citibank, which has over a million cardholders, is currently one of the local market leaders in the card segment with a market share of almost 20%.

According to RAM Ratings, Citibank, Maybank and CIMB Bank were ranked first, second and third respectively in terms of the amount of credit card receivables as at Sept 30, 2008.

Credit card receivables are outstanding loans.

Citibank’s credit card receivables amounted to RM4.4bil, followed by Maybank’s RM3.32bil and CIMB Bank’s RM2.57bil in that period.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng, however, feels that banks should lower interest rates for credit cards as the country’s interest rate level had come down since the outbreak of the global financial crisis.

“Lower interest charges will be a boon to consumers as it will help to ease their burden in servicing interest charges. As at end-March, credit card loans amounted to about RM24bil or 4% of total outstanding loans in commercial banks.

“A 1% reduction in monthly interest charges will reduce an estimated repayment burden of RM240mil for the nation’s credit card debtors,” Yeah noted.

He added that although the reduction in interest rates would affect the profit margins of banks, this could be offset by an expansion in customer base due to the more attractive terms and lower interest charges.

Sources:http://biz.thestar.com.my/news/story.asp?file=/2009/7/7/business/4235815&sec=business

————————————————————————

Credit card late payment fees cut

PETALING JAYA: Credit card late payment fees for all commercial banks will be reduced from a maximum of RM75 to RM50 beginning July 1.

At the same time, the minimum fee for late payment charges will be reduced to RM5 or 1% of the total balance outstanding at statement date, whichever is higher, up to a new maximum of RM50.

The Association of Banks said cardholders for its members would also be given a minimum three-day grace period from the due date of their statement to pay, during which no late payment fees would be imposed.

Its executive director Chuah Mei Lin said the move was another step taken to provide their customers with more flexibility in managing their credit cards.

“The provision of the grace period does not detract from the underlying principle of prompt and disciplined payment.

“Habitual late payers hoping to pay just before or after the expiry of the grace period will be disappointed,” she emphasised, stressing the need for them to better manage their personal finances.

Currently, not all banks observe the provision of a grace period while the policy for those that do differ from one institution to the other.

These new provisions follow reductions in credit card tiered interest rates and late payment fees announced earlier.

Sources:http://thestar.com.my/news/story.asp?file=/2009/6/26/nation/20090626210032&sec=nation

————————————————————————————

Banks explain why credit card rates can’t go any lower

WE refer to the commentary by P. Guna­segaram “Credit card rates can be lower” (The Star, Feb 17).

The Association of Banks in Malaysia wishes to reiterate that the recent revisions to the credit card rates, which are already one of the lowest in the region, have taken into consi­deration all relevant factors.

Moreover, we would like to reiterate that in addition to the funding costs, there are very real and substantial costs involving a credit card operation.

Given the complexities of the credit card business, these costs include credit risk, particularly since the credit card debt is not backed by any form of security or collateral, fraud risk, administration, infrastructure (credit card users enjoy prompt and fast service anywhere in the world due to a sophisticated and costly worldwide network and back-end system) and marketing and promotion. In turn, the credit risk component encompasses credit bureau charges, collection costs as well as fees and expenses for bad debt collection.

The costs mentioned are firmly in double digit ranges. Indeed, the bad debt collection cost alone can be as high as 6%. In a worsening economic environment, credit risks and associated bad debts will rise.

Furthermore, each bank has its own business model and because its card business portfolios differ, the net margin for each bank is different. At best on an average in respect of the three tiers, it does not exceed 5% overall. Banks are constantly seeking to improve its cost base and pass savings to customers.

It must also be appreciated that banks are in fact funding the outstanding RM22.8bil in credit card loans, and which is growing at 10% year-on-year, as they would have paid the merchant the day after the transactions but would only receive payment from the card holders 21 to 50 days later.

Interest is earned based on the applicable tier bracket only in respect of the revolving balances. Despite rising costs, the interest rate band for credit card users in Malaysia was cut on March 31 to between 13.5% and 17.5% per annum.

The Malaysian banking system operates one of the lowest pricing regimes in the world. In addition, credit cardholders are at liberty to shop around for the best rates or take advantage of the “no frills” cards.

Checks on information available on relevant websites reveal that credit card rates in Asia, the UK, US and Canada can be as high as 45%. Among our neighbouring countries, Australia charges 9% to 19.5% , Hong Kong 17.8% to 36%, Singapore 24%, Taiwan 3.99% to 20% (risk-based), Thailand 20%, and the Philippines 33% to 42%.

Banks are always willing to engage with credit cardholders who are unable to repay their outstanding credit card debt. It is in the banks’ interest to manage such situations before the debt escalates to become non-performing.

Likewise, affected credit cardholders would benefit if the credit card debt can be resolved sooner rather than later. Credit cardholders are thus encouraged to approach the banks to review their financial position as and when necessary.

The Association of Banks in Malaysia,

Kuala Lumpur.

P. Gunasegaram replies:

The credit card business has high margins and admittedly high risks as well.

In the article, I had assumed a non-performing loans rate of 6%, which is three times the industry average, already reflecting the higher risks.

The gross margin after this is 10%, which is very high for a lending operation.

All aspects of the financial services business such as lending, insurance, broking and so on have their own costs, and the credit card business is not alone in this matter.

The point I am making is that those who engage in the lending business must make reasonable profits and that does not appear to be the case for credit cards when the gross margin is 10%.

To remove guesswork, the industry should give a full breakdown of its costs and tell us what is their net margin after all costs, also giving details of the highest net margin and the lowest in the industry. That will settle the argument.

Sources:http://thestar.com.my/news/story.asp?file=/2009/2/27/focus/3344877&sec=focus