Credit Cards: Where shall I begin? (A rough guide to credit cards from a non-expert)

Sometimes, it’s hard to understand what’s going on with credit cards. A single bank can come up with many different types of credit cards. All with individual features and benefits (and pitfalls as well!).

Let’s have a brief look at some of the different features of credit cards. Please take note that I’m writing based on my experience and past readings. So, if you notice any inaccuracies or you’d like to add some points, do share your thoughts as well.

VISA and MASTERCARD and AMERICAN EXPRESS and DINER’S CLUB

There’s not much difference between VISA and MASTERCARD as far as I know. Both are accepted worldwide. It’s the same for AMERICAN EXPRESS (AMEX) and DINER’S CLUB but as per my observation, DINER’S CLUB is not really that popular. For an AMERICAN EXPRESS credit card, there are a number of business premises that will charge you a little a bit extra. According to them, AMEX costs them a lot.

DEBIT VISA/MASTERCARD, CREDIT VISA/MASTERCARD, PREPAID VISA/MASTERCARD

Debit VISA/MASTERCARD basically deducts the money from your account as you spend. If your money runs out, that’s it.

Credit VISA/MASTERCARD is the usual one that a lot of people owns. As you spend, you are effectively borrowing that money. At the end of the month, you will be served with a bill and payment is expected to be made in full. If you don’t, that’s when those high interest rates start to kick in. If you don’t manage this properly, you will fall into a bottomless pit.

Prepaid VISA/MASTERCARD is pretty similar with the debit one, except that to use the card to spend, you’ve got to reload/top up/recharge/put in (whatever you want to call it) some money into the card.

NORMAL and GOLD and PLATINUM

This one pretty much relates to your credit limit. Gold and Platinum cards generally have higher credit limits (i.e. you are able to spend more). The perks/rewards that come with the card is also better. However, the annual fees are usually much higher than the regular credit cards. Some people also choose Gold/Platinum cards because of its status. I know a few who does that.

REWARD POINTS COLLECTION

Some credit cards allow you to collect points as you spend. As soon as your points reach a certain level, you’ll be able to redeem holidays, gifts, and all kinds of doodads.

I believe that this is just a marketing ploy to get you to spend more.

There’s also a Malaysian bank that offers car petrol discounts with their credit cards. The catch is, you’ve got to pay higher annual fees.


ANNUAL FEES or NO ANNUAL FEES

Generally, credit cards have annual fees attached to them. However, there are also credit cards without any annual fees. Those are the cards that come with the slogan “Free for life!”.  Important to note that usually those “Free for life!” cards forego most of the perks that usually come with regular credit cards. So, no point collections, and no doodads redemption. This is based on my experience as a supplementary card holder with a Malaysian bank. Do correct me if I’m wrong yeah?


INTEREST RATES

Different banks offer different interest rates for their credit cards. It’s important to shop around and have a look at how high the interest rates are.


INTEREST FREE PERIOD vs. NO INTEREST FREE PERIOD

Some credit cards have interest-free periods and some doesn’t. Basically, what that means is that if you pay your balance in full within the interest free period (let’s assume 60 days), then no interest charges will be laid upon you.

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Disclaimer: This article is not a specific nor general advice on managing or investing your money. This article does not constitute a recommendation nor does it take into account your investment objectives, financial situation nor particular needs.

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About nadlique

This blog is about the journey of a 28-year-old Malaysian towards financial freedom. This blog was started back when the blogger was 21 years old. However, his journey towards financial freedom had begun way before that. Materials such as investing, business, entrepreneurship, equities, and real estate are presented. The author also posts his thoughts and observations on life in general.

Comments

  1. we batter start manage our credit….especially the one which come with the card and sometime…cardssssss

  2. Indeed, credit management is very important.

  3. Arrivu says:

    Hi Nadlique,

    Actually, the difference between Diner’s Club and American Express are charge card. They are not credit card. The main difference is charge card you must pay bill in full, no such thing as pay minimum 5%. If you don’t pay in full, you’ll be charge with late payment fee.

    As for the free for life credit cards, they still have points that you can redeem for gift,etc. There are 1 or 2 banks’ free for life card have no points but might have some sort of rebates.

    ~Arrivu~

  4. Hi,

    check out this new credit card promotion for AMEX.
    its called amex gold credit card..i just applied it yesterday ;p

  5. Hi,
    For some payments online requesting master card,American card or other types of card but I don`t have any card.
    I am not sure whether I should borrow these cards and make agreement or I should make specific card for my ownings.
    Please,can you help me to clarify this?

    Hope to hear

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