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?
- Loss of spending control
- Committing future income and limiting financial flexibility
- Accruing finance charges from the date of transactions
- Interest-free use of funds from the date of purchase to payment (correct)
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?
- The balance is repaid quickly
- The interest-free period still applies
- It takes longer to repay the balance and more interest is paid (correct)
- No finance charges accrue
What is the purpose of the Balance Transfer Facility?
What is the purpose of the Balance Transfer Facility?
- To reduce the interest rate on an existing debt (correct)
- To increase the credit limit
- To obtain a new credit card
- To convert credit card debt to cash
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?
What is a penalty for late payment on a credit card?
What is a penalty for late payment on a credit card?
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?
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?
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?
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?
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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