The credit card debt problem is one which if faced by people from all walks of life not only in Malaysia but in the world over. This is because unlike the 80s, credit cards are no longer an item of prestige and luxury where only those with high income are eligible.
Today, almost anyone with a stable income and a healthy credit status is able to apply for a credit card. In fact, almost all the banks in Malaysia offer many different types of credit cards as long as you are interested to be their customer. In the long run, the exponential growing interest rate will put in a very tight financial situation which will pretty much govern how you live your life because you will be controlled by debts, trying to pay the minimum amount each month.
The main concern with credit cards is that regardless from which bank you apply from, you might fall into the credit card debt problem. When you use a credit card, you are actually spending into the future which means that you are actually using the money that you haven’t earned. In other words, you are living on credit and spending money that you do not have because the banks are more than ready to offer you the credit line to spend, spend and spend.
This temptation is one which a lot of card users fall into. Some banks like AmBank and Hong Leong offers co-branded cards where you are given special privileges when spending with a certain merchant. This is where you might not be in control of your finances explicitly, allowing the bank to pay on your behalf through a long-term commitment.
If you are using direct debit to pay your monthly insurance policy, you might overlook your expenditure. Before you know it, you have almost reached your credit limit as you are spending on other things as well. If you let this situation continue, you might be in more debts as you could be having more cards, using one to cover the debts or another. You have to be very careful at this point because many have gone the way of Ah Longs or loan sharks thinking that they can pay off their debts after borrowing money illegally.
The most important thing about having credit cards is to know why you have them where the main reason must be convenience rather than luxury on credit.