In Malaysia, many credit cards now come with a 0% Easy Payment Plan (EPP) – a repayment scheme that allows you to repay your purchases made with a credit card at selected merchants by instalments and be charged at absolutely no interest.
But watch out, as you may still end up paying interest if you don’t read the fine print. Following are some important facts to check if you’re planning to utilise this feature on your cards to make a purchase.
1) Make sure it really is zero percent
Ideally, an EPP facility means you pay absolutely no extras on your purchase. In practice, however, it is not uncommon (though not always applicable) for Malaysian consumers to be charged an upfront administration or installation fee by the merchants offering the said plan.
Therefore, before activating the repayment facility on your purchases, make it a point to enquire with the merchant if such additional costs exist.
For a big-ticket item at about RM10,000 with a 3% administrative charge means you’re paying RM300 extra right from the start! This in turn defeats the whole purpose of engaging in a repayment feature where the interest is supposedly not charged.
2) Make sure your purchase is subjected to zero interest rate
Despite what many people think, the zero interest repayment scheme usually do not cover everything. Most of the time, the banks have their own lists of participating merchants offering the repayment feature only for the cards it issues; and every merchant in turn, has its own terms and conditions binding the use of the repayment feature in its outlets.
Some cards only provide the 0% EPP with a minimum purchase amount of several hundred ringgit. Simply put, you wouldn’t be able to just walk into your favourite outlet and expect to make a purchase with the EPP facility, without first making sure that the outlet (i) does support the plan on your card, and (ii) does support the said plan for the specific amount of your intended purchase.
3) Late payment rules and other policies
When you sign up for the repayment facility, bear in mind that you are expected to service the instalments promptly and strictly, probably more so than a standard credit transaction. With most banks, failure to service your EPP instalments would result in:
- Automatic revoke of your 0% interest benefit (where you’ll end up paying the standard credit card interest rates at an average of 12.5% – 17.% p.a.), or
- Termination of your instalment plan (where you’ll be expected to settle the outstanding amount in full)
Either way, the impact on your financial state is going to be drastic and unpleasant. Additionally, note that some banks do charge a fee for early settlement of the outstanding amount, while others don’t. If early settlement is an option you may wish to take, it’ll be to your interest to check with your bank on this.
4) Influence on your spending behaviour
There are always two sides to a story when it comes to financial instruments. With a zero interest repayment scheme, the very convenience that enables you to make a vital purchase (such as buying a computer you absolutely need for your work) could also entice you to spend way beyond your means (such as buying the very same computer but at two specs higher than what you need).
The common pitfall when it comes to such a repayment plan is that most people tend to look at the smaller instalment amount rather than the larger full purchase amount. While RM10,000 for that unnecessarily large TV might sound way too expensive in a lump sum; you could still be enticed to make the purchase if you choose to evaluate the purchase based on RM500 per month for 20 months.
When making a purchase under such payment feature, make sure you always have the bigger picture (total price) in mind! If you made several purchases using the 0% EPP in a single month, the total monthly instalment may run into several thousand ringgit although individually, the instalments amounts may seem small.
Looking for credit cards with 0% Easy Payment Plan? Check out our credit card comparison table right now!
This article was first published in July 2013 and has been updated for freshness, accuracy and comprehensiveness.