Are you thinking of getting a credit card? It’s an intimidating decision, especially if this is your first time getting one. But never let that scare you! Credit cards are a great way to kick-start a blank credit record while teaching you proper money management. Before that, however, it’s important you have a good understanding of credit cards as well as what to look for if you’re getting your first one!

First and foremost, the credit card terms you NEED to be familiar with:

• Annual fee is how much you will be charged on a yearly basis

• Interest rate is the amount you pay for borrowing money 

• Annual Percentage Rate (APR) is the annualized representation of your interest rate. There are different types of APR – the purchase APR, the interest rate charged on purchases when you don’t pay off the card’s balance in full and on time each month; the penalty APR, applied to certain balances when you violate the card terms and conditions like failing to make payments on time; and introductory APR, a special temporary rate that credit card companies may offer as a perk for signing up with a specific card

• Cash advance is the withdrawal of cash from your credit card. To make a cash advance, you must consider the fee (typically 5% of the total amount), and the APR (which is usually around 18%)

• Credit limit is the maximum amount of credit available to you by the credit card issuer. You are advised to use less than 30% of your credit limit to have good credit utilization. Having a good credit score can affect your ability to get financing on things like a home or car, or start a business

• Credit utilization is the ratio of your outstanding credit card balances to your credit card limits. To calculate your credit utilization ratio, simply divide your credit card balance by your credit limit, then multiply by 100. For instance, if your credit limit is $5,000 and your credit balance is $1,500 then your credit utilization is 30%

• Balance transfer moves a balance from a credit card with a high APR to one with a lower APR in order to save money on the interest you’ll pay. The fee for balance transfer is typically between 0% to 6% in Malaysia

• Grace period is a set length of time after the due date during which payment may be made without penalty, usually around 15-20 days

Are you eligible for a credit card?

Before you get over excited about applying, you need to make sure you’re eligible for it. Most credit card for beginners requires a minimum annual income of RM 30,000 in Malaysia. 

With credit cards, the higher the annual income you have, the better benefits and bonuses. However, don’t be discouraged if your annual income is on the lower end for now. Some cards are open to those with lower annual income such as Affinbank Mastercard Classic. Their minimum requirement is RM24,000 per year or RM 2000 a month.

On the other hand, if you have a high annual income, you are offered more options to choose from.

However, if you happen to juggle other financial responsibilities such as car loans or student loans, you might have a chance of getting your application rejected if they’re not paid on time. If your loan balances are high and you’re not paying them back consistently enough, most issuers will be hesitant to accept your application. This is in case you are unable to pay them back. So make sure you have consistent and clean debt-repayment records in order to gain better credit scoring with the banks. 

What if I have no loans or debt? Could it be a good thing?

Not necessarily. You also need to have some sort of credit history to apply for a card. Not having any credit history at all means you’ve never borrowed money in the past – either for a student loan, car loan or house loan. This can make credit card issuers hesitant because they don’t know whether you’re capable of paying back consistently.

Here’s a method to build your credit history if you’re starting from scratch. This is for those of you who never had any loans or debt repayment history including PTPTN/study loans.

1. Apply for an entry-level credit card even if your income is eligible for more premium cards. The chances of you getting approved for a basic card is higher (although not guaranteed) as they are usually targeted at fresh graduates and people with their first jobs.
   
2. Apply from the bank that your salary is banked into. Is this method foolproof? Again, no, but it increases the probability of your application getting approved.
   
3. Avoid applying for multiple credit cards at once. You may think that the more banks you apply with, the higher the chances of getting approved. The opposite holds true. Multiple hard inquiries can hurt your credit score further. Choose one card and stick to that application.
   
4. Apply at roadshows or their designated booth. Remember those credit card salesperson you’re always desperately trying to avoid? Now they’re your best bet. Since their aim is to close sales, they’ll be your comrade in arms when it comes to your application. While they cannot alter or manipulate the system, they can advise you on how to fill up your application to make it look favourable enough to the banks – legally of course.

What do you need to look for in your first credit card?

You don’t want to be too overwhelmed for your first credit card so look for these tips before you start applying!

Annual Fee	Free annual fee for the first year; OR free annual fee for life
Interest Rate/APR	Lowest interest rate
Balance Transfer Interest	Lowest interest rate; OR lowest transfer fees
Cash Withdrawal	Lowest interest rate; OR lowest withdrawal fees
Bonuses (This depends on what you usually spend on, and what you hope to benefit)	Cashbacks/ Rewards points/ Travel benefits

Annual Fee

The range for annual fees can go from RM90 to RM800, depending on the type of credit card you want to apply for. If you’re living off a fresh grad salary, consider a credit card with “free for life” feature – you won’t have to pay a single cent at all – or one that offers free annual fee for the first year. 

Interest Rate/APR

To reduce the chances of you drowning in debts you can’t pay, try looking for one with low interest rate per annum. Typically, the interest rate is between 10% to 15% so try to find one with less than 15%. A good example of this would be BSN Classic Visa credit card. Their interest rate is 13% and the annual fee is free of charge. 

Balance Transfer Rate

Let’s say the interest rate for your first card is 15% and you want to pay down the credit card debt.Try to find one card with low balance transfer rate to shrink your overall debt and save you some money. 

Bonuses

This is very dependent on your lifestyle preferences. If you like to travel or your work requires a number of overseas trips, look for cards that offer great travel rewards. Or if you like shopping, consider opting for rebate benefits. 

Be smart with your credit card

One of the main reasons to get a credit card is to boost your credit. Which is why you need to be a smart credit card user.

Bad credit results from late payments or partial payments. When you have bad credit scores, this may prevent from taking future loans or applying for another credit card. So, to make sure your credit activity helps as much as possible, pay in full and on time every month and stay well below your credit limit.

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