Fresh Grad And Looking For A Credit Card? Read This!
A credit card can be a friend or a foe to your finances — depending on how you manage your spending. For a fresh graduate who just joined the workforce, this can be a powerful tool to better manage your cash flow, if used wisely or a terrible hurricane if you’re careless!
In March 2011, the minimum annual income required to be eligible for a credit card was raised from RM18,000 to RM24,000. This minimum income is based on your gross earnings, which include bonuses, allowances and other income. As long as you can prove that you make RM24,000 and above every year, you can get a credit card.
Fresh graduates in Malaysia earn an average starting salary of RM2,500, which means the bulk of the country’s young workers are eligible credit card owners. Whether or not they are able to handle the responsibilities that come with frequent credit card usage is another matter.
While economists and financial management experts agree that this average starting salary is sufficient for fresh grads, a whopping 77% of those surveyed on a local job portal beg to differ, citing it was barely enough to even cover their basic necessities.
About 60% of respondents expected a starting salary of RM3,500, while 30% asked for RM6,500. Unfortunately, such demands are deemed exorbitant by many employers, with 66% saying they were willing to pay between RM2,500 and RM2,800 depending on qualification.
However, given the soaring prices of essential goods, many fresh graduates may have trouble getting by. Many may need to adjust their lifestyles and skip that Starbucks latte for a kopi-o at the neighbourhood kopitiam.
The good news is, they can get credit cards to work to their advantage by leveraging on the various features and benefits offered by credit card companies. They include cash backs, reward points and discounts with selected merchants.
However, as those earning RM36,000 per annum and less can only hold credit cards from a maximum of two issuers, it is imperative to pick the ones that best suit their lifestyle. Owning a credit card gives you better spending power, but also comes with a bigger responsibility. Here are some key factors that a fresh graduate should look into when choosing their first credit card and three of the best entry level cards in Malaysia.
1. Check the merchants
One of the best things about using a credit card are the discount and privileges you get when you spend at the card’s selected merchants. You’ll be surprised at how much you can actually save if you use a card that offers great discounts for things that you regularly spend on.
To choose a card for that, first identify what you spend on the most. Is it entertainment, petrol or online shopping? Once you know the answer to that, then it’s much easier to find a credit card to suit your lifestyle.
Pro tip: Don’t be distracted by the attractive sign-up offers!
One card that offers great benefits for youths, especially the social butterflies are the Citibank Clear Card.
This card is ideal for the social butterfly, especially if they enjoy movies, nightlife and having coffee with friends.
The Citibank Clear Credit Card offers discounts and privileges at Zouk Club KL, Coffee Bean and Tea Leaf (CBTL), and free movie tickets at TGV, GSC and Cathay.
Some of the perks that card owners get to enjoy include a 15% discount on purchase of hard liquor at Zouk KL (that’s a cool RM52.65 savings for a RM351 bottle), and complimentary access into the club for you and a friend from Tuesdays to Saturdays from 9pm to 12pm. Usual admission charges go for RM25 to RM35.
Card owners will also enjoy a complimentary drink from CBTL for every drink purchased from Monday to Friday, and get a one-for-one movie ticket at selected cinemas every Friday.
The downside is, the card comes with an annual fee and you will need to request for a fee waiver if you wish to save that money.
2. Annual fee waiver
Some credit cards charge an annual fee. When they do this, they get the money upfront even before consumers start using their credit card. Remember this fee is separate from the government charge of RM50.
However, plenty of credit cards don’t charge one and in truth, consumers do not get anything in return whether they pay it or not. Revenue generated from credit card transactions and interest rates are often more than enough to offset your annual fee.
Pro-tip: Don’t be afraid to negotiate for a fee waiver!
Most banks will likely give you a fee waiver or some substantial incentives to keep your card open. This is because credit cards are extremely profitable for banks and doing away with the extra expenses will attract more customers to sign up.
The Maybankard 2 Gold Card come with no annual fees and offers cashback benefits with both the Maybankard 2 American Express Card (AMEX) and Maybankard 2 MasterCard, in just one sign up and one statement.
The minimum income requirement of RM30,000 is notably higher than most entry level cards in the market, but many fresh graduates should still be qualify for the card provided that they take home the average income of RM2,500.
The Maybankard 2 AMEX allows card owners to earn 5% cash back for dining on weekends, though the amount is capped at RM50 per month. Participating dining merchants include popular restaurant chains like Red Lobster, Longhorn Steakhouse and Olive Garden.
You also get 5x TreatsPoints for every RM1 spent in and outside the country
One setback with Maybankard 2 AMEX is it is not as widely accepted by merchants. However, major retail stores in the Klang Valley, including Tesco, Cold Storage and Jaya Jusco do accept AMEX cards.
If the merchant does not accept AMEX, you can use your Maybankard 2 MasterCard, which earns you 1x TreatPoints.
3. Get rewarded for your spending
Many credit card companies offer incentive programmes, which include cashbacks, reward points and air miles for customers to spend more.
A recent survey by the American Institute of Certified Public Accountants found that the spending habits of Gen-Y consumers, which make up a sizable portion of the fresh grad market, are premised on materialistic values. About three quarters of millennials want to have the same clothes, cars and technological gadgets as their friends.
Whether you are a gadget geek, movie buff or a fashionista, when shopping for credit cards, always pick one that best complements your spending habits.
The savvy and eclectic Gen-Yer will be able to take advantage of the customisable cashback benefits the Mach Visa Credit Card offers.
With the Mach Credit Card, cardholders have the option of 12 cashback categories, from which they can pick from and customise to fit their lifestyles. These categories are grouped into packages:
The good thing about the Mach Credit Card is it allows you to maximise your cashback benefits according to your lifestyle, which means you actually get rewarded while doing the activities you love best.
Cashback is capped at RM100 quarterly for each selected category and RM50 per month for other purchases. You can choose to add on additional cashback categories on top of your selected lifestyle package. The number of add-ons you can include in your package is unlimited, but you will have to fork out an extra RM5 for each calendar quarter for each add-on.
Pro tip: Cashbacks are great, but they can tempt consumers to overspend. Always try to clear your credit card bill to avoid interest charges, because your cashbacks would mean nothing if you end up paying for interest on your balance.
Many credit cards nowadays are targeted at fresh graduates and it allows a person to build his or her credit history. Use it wisely to maximise the benefits that they offer. The catch is of course to never go overboard with your credit card. Managing your money well is key to a sound financial future.