A credit card is one of the most popular and convenient ways to pay for items worldwide, and Malaysia has not been left behind. It has a wide range of credit cards available, each with its benefits and drawbacks. This makes it challenging to figure out which is best for you without incurring high-interest rates. So, whether you’re just starting or are ready to switch cards, this comprehensive guide will help you choose the best credit card for your needs. It will cover all the best credit cards in Malaysia and outline the pros and cons of each. That said, here is all the information you need to make an informed decision. What is Credit Card? Image source: Pexels.com A credit card is a payment card that enables the holder to purchase goods and services and withdraw cash from an ATM with a pre-determined line of credit. The issuer provides the customer with a credit card statement indicating the monthly balance, any payments made, and other charges. The amount of money owed is then paid with a specific interest rate based on the said term conditions during credit card application. How does it work? A credit card allows you to borrow money from the issuing bank up to a designated limit. When you spend with your credit card, the amount is deducted from that limit. The card issuer then bills you for the amount owed, usually monthly. The payment due date is typically 25-30 days after your statement closing date, and any charges received past that date will usually be subject to a late fee. Once the issuing bank has processed your payment, it will be reported to the three major credit bureaus. Your credit history, like payment history and how much of your available credit you are using, will be incorporated while calculating the credit score. The higher the credit score, the more probable you’ll qualify for favourable terms when applying for loans or other types of credit. When to use a credit card? A credit card is an excellent way to help build your credit score, manage cash flow, and track expenses. They are often preferred during retail spending or travelling abroad. When making a large purchase, you will enjoy benefits in the long run because you will earn rewards programs that offer annual fee-free cashback or discounts on a single receipt. Additionally, many credit cards offer protection against such losses if an item is damaged or stolen. On the other hand, when travelling, a credit card allows you to make purchases abroad without worrying about exchange rates or currency fluctuations. Also, they provide added protection when overseas as they are often more secure than travellers’ checks or cash. Credit Card: Advantages & Disadvantages While credit cards are essential, there are some advantages and disadvantages that come with using them, so you must be aware of both to make the most informed decision regarding managing your finances. And with that said, take a look at the pros and cons of credit cards. Image source: Pexels.com Advantages of Credit Cards Convenience Credit cards are an easy and quick way to make payments wherever you go. They are convenient as you don’t have to carry cash or wait for bills to arrive in the mail or at your doorstep. Security Credit cards provide a layer of security that cash or check can’t match. There are protections to replace stolen or lost cards and limit liability if fraud occurs. Rewards Many credit card companies offer programs that allow you to earn reward points, annual fee-free cashback, and other perks on purchases made with the card. Credit History Using your credit card responsibly may help you build a positive credit history, which is important for making larger purchases like buying a house or car. Disadvantages of Credit Cards Debt It’s easy to accumulate debt with credit cards if you don’t pay your balance in full each month. The interest rates on credit cards are often high, and the debt can quickly go out of control if you’re not careful. Fraud Credit card fraud is unfortunate, so you must check your statements for suspicious activity and report it immediately if something looks off. Fees Many credit cards come with annual fees that can add up over time. You may also be charged late fees or other penalties if you miss payments or go over your limit. Impulse Purchases It’s easy to make impulse purchases with a credit card, especially when shopping online. This can lead to overspending and debt, so it’s essential to be mindful of how much you are spending. Image source: Pexels.com How is a credit card different from a debit card? Credit cards and debit cards are convenient payment methods, but the two have fundamental differences. Credit cards enable users to borrow a certain amount of money from the issuing bank and repay it later. While this method comes with more consumer protections than debit cards, such as extended warranty coverage and fraud protection, consumers may be required to pay interest on their borrowed funds. Moreover, companies rewards credit cards holders through various programs or annual fee-free cashback. These are not available with debit cards, making credit cards a more attractive option for those looking to get the most out of their purchases. Credit cards also often offer higher spending limits than debit cards, allowing users to make larger purchases without the risk of overspending. However, it is essential to remember that improperly managing a credit card can lead to serious financial issues. For this reason, it is crucial to ensure you understand any credit card’s terms and conditions before using it. Why do you need a credit card? Having a credit card can help build your credit score, which is crucial if you want to get loans or other financings in the future. Also, a credit card can come in handy for emergencies or unexpected bills. Credit cards also offer rewards points and cash back for purchases made with them, giving you additional benefits when you use them. Image source: Pexels.com The Three Best Credit Cards Available in Malaysia When it comes to choosing the right credit card, Malaysia offers a plethora of options. There is something for everyone, from annual fee-free cashback cards to rewards programs and travel benefits. To assist you in narrowing down the choices and finding the best credit cards that fit your spending habits, here are the top three picks for credit cards available in Malaysia: AEON Japan Club of Kuala Lumpur Credit Card AEON Japan Club of Kuala Lumpur Credit Card is among the top options you should consider since it is annual fee free for holders. It offers a favourable interest rate of 15 % annually and 5 % cashback after purchases. Also, the card issuer provides rewards points for every time you spend petrol, entertainment, dining, travel, and other utility bills. Additionally, if you love overseas spending, you can use the AEON Japan Club of Kuala Lumpur Credit Card since it provides safety regardless of location. Maybank Islamic Mastercard Credit Card The Maybank Islamic Mastercard Credit Card benefits Malaysian Muslims because it complies with Sharia laws and offers rewards free from riba. Cardholders can enjoy discounts on services such as hotels, car rentals, and 5 times annual complimentary access to the plaza premium lounge. The card also offers a wide range of cashback rewards that can be redeemed for products and services from select merchants. Moreover, the Maybank Islamic Mastercard Credit Card has an exclusive relationship with the Singapore Airlines program, which offers cardholders great rewards and benefits. Individuals can earn air miles for every purchase made with the card, which can be used to purchase air tickets and other rewards from the airline’s network. In fact, with a Maybank Islamic premium card, you can enjoy treat points that can be used on utility bills, education, and insurance. Furthermore, with this credit card, you can save on gas. Also, once you reach 8,000 treats air miles, you can redeem them with 1,000 Asia Miles or KrisFlyer. OCBC World MasterCard Credit Card Another credit card you should consider is the OCBC World MasterCard. This card offers a variety of features and benefits like travel insurance of up to RM 2 million, unlimited 1.2% cashback when you spend RM1,000 per month, and 0.6% for over RM1,000 per month. You also enjoy low-interest rates, no annual fees, and access to KLIA Plaza Premium Lounge. Image source: Pexels.com Credit Card Charges You Should Know Annual Fees Most credit cards come with an annual fee when you open the account or every year. Depending on the card type, this fee can range from $50 to several hundred dollars, and it’s important to consider how much value it will provide in return for the cost. Foreign Transaction Fees Many credit cards will also charge fees after you spend international purchases or money transfers, ranging from 2-4% of the transaction amount, making it crucial to check with your card provider before making such payments. Cash Advance Fees Most credit cards offer cash advances that allow you to withdraw money from an ATM or bank. These transactions are charged at a higher rate than typical purchases and often come with cash advance fees of up to 5% of the amount withdrawn. Late Payment Fees Most credit cards will charge late fees if you forget to make a payment or cannot pay your bill on time. Therefore, you should stay on top of your payments to avoid these fees. Over-the-Limit Fees Most cards will charge an over-the-limit fee per transaction if you spend more than your credit limit. Interest rates Interest rates on credit cards can range from 0-30%, depending on the card type. Hence, it’s crucial to check with your card provider to ensure you understand the interest rate you are being charged and how it will affect your overall costs. Image source: Pexels.com Are there any no annual fee-free cashback credit cards? Yes, many credit cards offer annual fee-free cashback rewards or other benefits with no annual fee. For example, AEON Japan Club of Kuala Lumpur Credit Card, AFFIN DUO Visa CashBack, Alliance Bank Visa Infinite, AmBank Cash Rebate Visa Platinum, and BSN Gold Card. So, with so many options at your disposal, you must pick one that fits your needs. Steps to Apply for a Credit Card Online in Malaysia Applying for a credit card in Malaysia is straightforward; here are the steps you should follow: Check Your Eligibility Make sure you meet the minimum requirements to get a credit card in Malaysia. These include having a minimum income of RM24,000, being at least 21 years old, and having a good credit score. Compare Credit Card Options Once you have established that you are eligible for a credit card in Malaysia, you can compare different types of credit cards and the various features that each one offers. Apply Online Most applications for Malaysian credit cards can be submitted online. You will then fill in your details and provide documents such as proof of income, a copy of your identity card, and sometimes even a reference letter from an employer. Wait for Approval Once you have applied, the credit card company will process your application and let you know if it is approved. This process can take a few weeks, depending on the company. Activate Your Card After receiving your card in the mail, you need to activate it by calling the customer service number or logging on to the provider’s website. Image source: Pexels.com What is the maximum credit limit you have? The maximum credit limit for most credit cards in Malaysia ranges from RM10,000 to RM100,000, depending on your annual income. However, it is best to do a detailed credit card Malaysia comparison and find the best one for you. But, the card issuer may increase your limit if you demonstrate a record of timely payments and have a good credit score. Credit Card Interest Rates Credit card interest rates in Malaysia vary depending on the issuer, with some cards offering introductory rates as low as 0% while others may be higher. So, it is best to compare different offers to find the best provider with an affordable interest rate that perfectly fits your circumstances. Additionally, the interest rate charged on an outstanding balance may also be compounded daily, so it is best to check the terms and conditions of your card. Image source: Pexels.com Is there a limit on the number of credit cards you can have? Many people have been asking, how many credit cards can one own? So, to answer this question, most banks in Malaysia allow individuals to hold up any number of credit cards from their respective card issuer at any given time. In fact, having more cards may build your credit score, opening more finance opportunities in the future. However, there is a limit if you earn a minimum income of RM36,000. What are reward points in credit cards, and how can I use them? Reward points are incentives offered to cardholders by card issuers, which act as a reward after they spend on their cards. They can use these points for retail spending or get discounts on future purchases. Also, the number of reward points are usually earned when you spend using your credit card and will vary depending on the type of card used, the merchant, and its terms and conditions. Furthermore, there are many fascinating options regarding the best issuer available in Malaysia that rewards credit card holders. Some offer a 33 to 49 per cent credit limit, 5 to 6 reward points for every Ringgit spent on retail purchases, 0-1 Annual Fee Free Cashback, and up to 72% off on the annual fee, making them ideal for people on a budget. What will the consequences be if I don’t pay my credit card bill on time? You may incur late fees and additional interest charges if you fail to pay your credit card bill by the due date. Depending on your unpaid balance, your credit card issuer can also increase your minimum payment amount. Additionally, keeping up with payments for a short period could help your credit score, making it difficult for you to obtain any financing in the future. So, it is vital to know the consequences of failing on payments. Also, make sure you read your card issuer’s terms and conditions when signing up to ensure payments are made on time. Image source: Pexels.com How to use a credit card to improve your credit score? Using credit cards responsibly is one of the best ways to improve your credit score. It demonstrates that you can make payments on time and in full and manage debt effectively. Therefore, to use a credit card to improve your score, start by paying your bills on time and always keep your balance low. Also, avoid using the maximum amount on any of your credit cards, as this can negatively impact your credit score. Try to pay more than the minimum monthly payment and make the instalments more frequent if possible. This way, you’re not carrying a large balance for long periods, which can negatively affect your credit rating. Final Thoughts With so many choices on the market today, deciding which is right for you can be challenging. This is because every individual has different financial goals and preferences, so finding a credit card that offers rewards and benefits that fit your interests is essential. However, by comparing cards and knowing what you are looking for, you can find a credit card that fits your lifestyle perfectly! References https://www.malaysia.gov.my/portal/content/30834 https://www.iosrjournals.org/iosr-jbm/papers/Vol22-issue11/Series-2/B2211020813.pdf https://www.researchgate.net/publication/314093563_Debit_Cards_for_Local_Community’s_Monetary_Transations_A_Literature_Review