Podcast
Questions and Answers
What is one of the benefits of using a credit card that offers a grace period?
What is one of the benefits of using a credit card that offers a grace period?
What happens if only the minimum payment is made on a credit card?
What happens if only the minimum payment is made on a credit card?
What is the purpose of the Balance Transfer Facility?
What is the purpose of the Balance Transfer Facility?
What is a consequence of not paying the full balance on a credit card?
What is a consequence of not paying the full balance on a credit card?
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What is a penalty for late payment on a credit card?
What is a penalty for late payment on a credit card?
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What is the maximum number of credit card issuers that a cardholder earning RM36,000 or less can hold credit cards from?
What is the maximum number of credit card issuers that a cardholder earning RM36,000 or less can hold credit cards from?
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What is the reason for keeping the loan tenure for a car purchase not more than 5 years?
What is the reason for keeping the loan tenure for a car purchase not more than 5 years?
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What is the purpose of getting a PUSPAKOM inspection done when purchasing a used car?
What is the purpose of getting a PUSPAKOM inspection done when purchasing a used car?
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What is the 'Rule of 78' related to in the context of car loans?
What is the 'Rule of 78' related to in the context of car loans?
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What is a key benefit of purchasing a used car compared to a new car?
What is a key benefit of purchasing a used car compared to a new car?
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Study Notes
Advantages of Using Credit Cards
- Convenience of shopping without carrying cash
- Availability of emergency funds
- Ability to use goods or services before fully paying for them
- Itemized bill for a month's worth of shopping
- Opportunity to buy needed items before price increases
- Interest-free use of funds with a grace period
- Convenience of making reservations or guaranteeing late arrival
- Form of identification
- Availability of free benefits
Disadvantages of Using Credit Cards
- Loss of spending control
- High finance charges for unpaid balances
- Credit repayment commits future income and limits financial flexibility
- Minimum payment implications:
- Longer repayment time
- More interest paid
- Finance charges accrue daily
- No interest-free period with outstanding balance
Balance Transfer Facility
- Transfer existing debt to another credit card with a lower promotional interest rate
- Minimum repayment of RM50 or 5% outstanding per month
- Penalty for late payment: 15% to 18%
- Considerations:
- Promotional period length
- Effective interest rate after promotion
- Coverage of new purchases
- Balance transfer fee
- Facility cancellation and early settlement fee
- Lock-in period restrictions
BNM Credit Card Guidelines (Effective from 1 April 2011)
- Minimum eligibility: income of RM24,000 per annum
- Cardholders earning RM36,000 or less:
- Maximum of 2 credit cards from different issuers
- Maximum credit limit: 2 times monthly income
- Cardholders earning RM36,000 or more:
- May hold more than 2 credit cards
Financial and Non-Financial Considerations for Purchasing a Car
- Affordability of initial downpayment
- Interest charging:
- Flat rate basis (HP)
- Tenure not exceeding 5 years
- Avoid loan outstanding > market value of car
- Early settlement:
- Rule of 78 rule (weights earlier payments with more interest)
- Fee/penalty charge
- Incidental costs:
- Car insurance
- Road Tax
- Petrol consumption
- Service and maintenance expenses
- Parking, toll, etc.
Used Car Purchase Considerations
- Cost is less than new car
- Higher risk and maintenance costs
- Previous owner's history
- Visual inspection for signs of accidents or damage
- Mechanic inspection and PUSPAKOM inspection recommended
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