What are the effect if you don't pay full amount of your credit card debt?

Thursday, September 04, 2014 Information 0 Comments

Do you have a credit card.? How many credit card do you have.?How much do you spend with your credit card?

For most people,credit card is give us one benefit that allows us to "buy now, pay later", as well as enjoy a variety of exclusive privileges offered by various dealer networks. But for those who are less disciplined, credit card is going to explode like a bomb next to a pile face large interest payments if you spend as they wish and not be able to make full payment at the end of the month.

In Malaysia, banks generally need a credit card for a minimum payment of 5% (or a minimum of RM50) from the credit card bill every month. If you do not pay the full amount of expenditure, you will be charged the so-called "Finance Charge" based on the tiered interest rate structure like this :

Rating	Finance Charge	Feasibility
I	13.5% per annum	Pay credit card bills on time for 12 consecutive months.
II	16% per annum	Pay credit card bill at least 10 of 12 months.
III	17.5% per annum	Pay credit card bill at least 9 of the 12 months.

* As recommended by the Bank, but the real interest rate varies from bank to bank

In short, you have to pay a minimum annual interest rate of 13.5% of the outstanding balance each time you make a decision to not pay the full bill your credit card.

To further understand the consequences do not make payment in full, see the following scenes:

Scene A: 

You have outstanding credit card balance of RM10,000
You want to make the decision to pay only the minimum payment each month
You have to pay credit card bills follow the schedule and qualifying interest rate of Stage I, 13.5%
If there is no new spending, you still need time to settle the remaining 82 months of going there, and will be subject to a finance charge of RM2,752.08.

Scenes B: 

You have outstanding credit card balance of RM10,000
You want to make the decision to pay only the minimum payment each month
• You have to pay credit card bills do not follow the schedule and interest rate Stage III, 17.5%
If there is no new spending, you need time for 88 months want to settle the balance available, and will be subject to a finance charge of RM3,896.83

In general, the youth that credit card users are most easily caught in a severe debt innings. Many university graduates in Malaysia has been declared bankrupt due to "heavy credit card spending." It could be the result of no financial management or most do not understand the credit card system.

In my opinion, everything have their pro and cons. We cannot expect everything is perfect. The important things is to discipline your self, and think before swap your credit card.