Tuesday, April 26, 2011

The Evil in Credit Cards

I have been holding three credit cards for a long time, since my working days.

At one time there exists a rule that credit card will not be issued to a person above 60 years old but today no matter at what age any one can hold a credit card and the card companies are making concerted effort to recruit even pensioners beside the young ones new to the job market.

Beside the convenient there are the inconveniences related to its usage which are periodically highlighted in the media. There seem to be increased in the number of bankruptcies among credit card holders. The growing number is frightening as they involved the younger generation who just started work. The authorities, the banks and the credit card companies could only issue reminders and advices but they fall on deaf ears.

I have been facing that predicament at one time because I was “living beyond my mean” by misusing the credit card facilities. Temptation was the cause of the problems. I was spending more than what I could pay. The problem started when the credit card allow the “minimum payment” scheme. The minimum payment could blow our credit balance out of proportion. The only saving grace could perhaps be the “spending limit” allowed.

At the end I found that through the two credit cards that gave me such facilities I was paying the so called “bank charges” of RM500 every time the “statement of account” comes around. That is a big chunk of money compared to my pension. I was in that situation for over two years before I realised that I have been feeding the bank that hold my credit card account more than RM6K annually. That’s a ridiculously large amount to give away callously for nothing.

I brought my predicament to a well to do friend who agreed to facilitate me a no interest loan and pay when available scheme. I am thankful to him for solving my problem – now I don’t owe the bank and I am free from its interest. It’s prudent spending for me now – I live within my budget and make sure my expenditure doesn’t exceed my income.

 The banks and credit card companies are very good at convincing that their schemes and plans are beneficial to the customers. Customers are offered cash loan at no interest initially for a few months to pay off their credit card from another card for customers that has multiple cards from the same bank. It’s just like “digging a hole to cover another”.

The other scheme is the one that the bank sent a blank cheque to an amount that almost cover up the credit limit. This would certainly guarantee the customer will find it difficult to pay off the total amount owed within a short period compounding his financial woes.

The other irritating experienced I had been when the bank “misplaced” my payment cheque which incurred additional bank interest and surcharge due to “non-payment”. After some hassle things were put right.

The worst experienced I had was when  I tried my best to reduced my credit card balanced with some extra amount that I felt I could afford. Somehow the bank didn’t credit my cheque payment to the account and I was left with an extra balance in my bank account causing me to miscalculate my spending. It was painful when the case was referred to the authority at Bank Negara with accusation that I have issued a few “bounced” cheques. I think my bank was well aware of my spending and issuing of cheques habit and record. It was settled amicably.

These are some of the pitfalls I have experienced and want to make aware to all friends out there. It’s better to spare sometime on your account rather than regretting it later.

If you can do away away with credit card, please do so.

1 comment:

  1. The key word is DISCIPLINE. If you have great ability to resist temptations, then the card can be a very effective tool to manage your finances. It's just like a knife - if you use it for good purposes like cutting fish etc you derive benefits from it. On the other hand, if you misuse it to stab people, you will be in for big, big troubles.