Tue, 21 May 2024


Know the pitfalls and perks of credit cards
Published on: Sunday, May 12, 2024
By: David Lo
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WITH a wealth of experience spanning 33 years in the banking industry, David Lo Ho Ping sheds light on the risks linked to credit cards. 

Having worked in multiple banks throughout Sabah, he unveils the aggressive promotion of credit card sales by banks, driven by the lucrative high-interest rates they generate from users. 

He emphasizes the dangerous cycle of debt that these promotions often plunge individuals, especially the youth, into, severely affecting their financial credit standings.

In today’s digital age, credit cards have become ubiquitous tools for managing finances, offering both advantages and disadvantages to users. While they can provide convenience and flexibility, they also pose significant risks if not used responsibly. Understanding the pitfalls and perks of credit cards is essential for making informed financial decisions.

The Pitfalls of Credit Cards:

1. Debt Accumulation: One of the most significant pitfalls of credit cards is the potential to accumulate debt. The ease of swiping a card can lead to overspending beyond one’s means, resulting in high-interest charges and financial strain. Using a credit card for purchases and only making minimum monthly payments is like borrowing from future funds rapidly.

2. High-Interest Rates: Credit cards often come with high-interest rates, especially for those with less-than-perfect credit scores. Carrying a balance from month to month can quickly balloon into a significant financial burden due to accrued interest charges. 

The bank’s flat interest rate of 18pc per annum translates to an effective interest rate of 32pc per annum. This effective rate is commonly applied in housing loans. Imagine the significant interest rate charged by the bank for the outstanding balance on a credit card.

3. Late Payment Fees: Missing credit card payments can result in hefty late fees, further exacerbating financial stress. Late payments can also negatively impact credit scores, making it more difficult to secure favorable loan terms in the future. In Malaysia, late payment interest for credit cards is typically charged when cardholders fail to settle their minimum payment by the due date. 

The interest rates and penalty charges for late payments vary among banks and credit card providers, but they are generally outlined in the terms and conditions provided to cardholders upon issuance. 

Late payment interest rates can range from around 1pc to 1.5pc per month on the outstanding balance, which can accumulate quickly if left unpaid over time. It’s essential for cardholders to be aware of their payment due dates and to manage their finances responsibly to avoid incurring unnecessary fees and charges.

4. Credit Score Impact: Irresponsible credit card usage, such as maxing out credit limits or frequently applying for new cards, can damage credit scores. A lower credit score may hinder access to future credit and loans, or result in higher interest rates when approved.

The Advantages and Features of Credit Cards:

1. Convenience: Credit cards offer unparalleled convenience, allowing users to make purchases online, in-store, or over the phone with ease. They eliminate the need to carry large amounts of cash and provide a secure method of payment.

2. Rewards Programmes: Many credit cards offer rewards programs that incentivize spending by providing cash back, travel miles, or points redeemable for merchandise. Savvy users can maximize rewards by strategically using their credit cards for everyday purchases.

3. Security Features:** Credit cards typically come with robust security features, such as fraud protection and zero liability policies. In the event of unauthorized transactions, cardholders are not held responsible for fraudulent charges, providing peace of mind.

4. **Build Credit History:** Responsible credit card usage can help individuals establish and build their credit history. Timely payments and low credit utilization demonstrate financial responsibility and can improve credit scores over time, leading to better loan terms and lower interest rates.


While credit cards offer numerous benefits and features, they also come with inherent risks that must be carefully managed. By understanding the pitfalls and perks of credit card usage, individuals can make informed decisions to leverage the benefits while mitigating the risks.

Responsible spending, timely payments, and strategic use of rewards can maximize the advantages of credit cards while minimizing the potential drawbacks.

- The views expressed here are the views of the writer and do not necessarily reflect those of the Daily Express.

- If you have something to share, write to us at: [email protected]


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