• Understanding Credit Card Interest-free Period

    Before one gets into interest free period, one needs to understand why it is important in the financial system for a country like Malaysia. Hence, it is essential to understand the makeup of credit card payment tendencies of Malaysians currently or at least in the recent past to understand why interest free period is essential and why as a Malaysian you should take interest in it.

    A nationwide survey and research on credit card payments was conducted as recently as 2012. Nielsen one of the leading market-research companies globally, conducted this study.  Here were some of the findings:

    • Only 47% of credit card users make their full credit card bill payments, with fail every month. This means out of the 10 people in Malaysia that you know, own a credit card only 4 of them are surely paying them while the 5th person has 70% of chances of paying. This means that the rest of the 5 people that you know are all paying interests for their tendencies in failure for paying their bills.
    • It gets worse. It is among these 53% of defaulters, of whom only 18% are paying the minimum monthly payment, which is 5% for all credit cards. This accounts for 1 out of 5 of those defaulters that you know, who will pay the minimum while only 15% pay more than the minimum amount.

    While this is the situation of credit debt in Malaysia, the interest-free period should only be an encouragement for paying the bills and not a reason to lull around making the payments.

    Concept of Interest-Free Period

    In simple words, this is a time period, for which, you as a credit card user have made the complete payment for the bill, before due date. This means that at this time no interest will be charged. Hence, known as the interest free period. Partial payments obviously do not count under this, since interest will be charged on the outstanding balance for that bill. Almost all credit card providing companies in Malaysia give a customer a 20 day interest free grace period for the purchases that they make at retail. Hence, the due date of the bill statement is generally the time up to which it is considered an interest free period. Hence, paying off the amount by the bill due date will not levy any interest being charged.

    If Outstanding Balance Is Partially Paid

    Here is the interesting deal with interest free period payments by Malaysian credit cards. They mention this as an added benefit, whereas it is not exclusive to most companies, but the truth be-told, banks in Malaysia cannot deny you this feature, unless you have made partial payments of your bill during the interest free period. If you do so, you will have to pay interest on all the payments you make.

    How to Avoid Credit Card Debt?

    This is a whole new ball-game together, but once you have understood interest free period, here are some pointers:

    1. Shift your credit card provider to a company that charges lower interests.
    2. Opt for credit cards that give you cash back offers and other discounts to help you reduce your bill.
    3. Use your debit card as an alternate to your credit card.
    4. Lot of companies, provide Touch n Zing cards. Use them since you can only make an auto re-charge only once a day, controlling your bills.
    5. Prioritize your spend into necessities and luxuries.
    6. Some credit cards come with auto -payment options. This way you can never not pay your bills without interest being levied as long as you have the billed amount in your account.

    In other words, it is only you who can control the bills and hence avoid paying excess interests or for that matter interest at all by using the credit card wisely.

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