{"id":4484,"date":"2013-04-05T00:09:28","date_gmt":"2013-04-04T16:09:28","guid":{"rendered":"http:\/\/www.imoney.my\/articles\/?p=4484"},"modified":"2025-04-11T18:06:59","modified_gmt":"2025-04-11T10:06:59","slug":"credit-card-numbers","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/credit-card-numbers","title":{"rendered":"Credit Card Interest Rate \u2013 Why You May Be Suffering Because of It"},"content":{"rendered":"

\"credit<\/p>\n

The consequences of not paying your credit card bills in full is huge and can possibly lead to bankruptcy for those who are not disciplined enough.<\/p>\n

One of the reasons why many people seem to be playing catch up with their ever increasing debt is the lack of awareness and education. To safeguard yourself from falling into the debt trap, it is important to find out and understand how card issuers calculate financial charges (i.e. interest) based on your outstanding credit card balance.<\/p>\n

<\/span>How to calculate monthly flat rate interest?<\/strong><\/span><\/h2>\n

To understand why interest is such a threat to your pocket, let\u2019s take a look at how normal monthly interest is calculated using a flat rate.\u00a0This is really simple and can be done with just a calculator:<\/p>\n

Monthly interest using flat rate<\/strong> = (Annual Interest Rate (%) X Principle Amount) \u00f7\u00a012<\/p>\n

\n

Example:<\/strong> If you owe RM10,000 and the rate is 18% p.a., your monthly interest would be (18% X 10,000) \u00f7\u00a012 = RM150<\/strong><\/p>\n<\/div>\n

<\/span>How is your interest computed?<\/strong><\/span><\/h2>\n

Credit card interest is calculated based on compounding interest every single day. To understand how it works, consider this:<\/p>\n

Day one:<\/strong> You start off with a principle amount. By the end of the day, your daily interest is computed based on this principle amount using a daily rate (basically, by dividing your annual interest rate by 365 days). Then, this interest is added onto your principle amount.<\/p>\n

Day two:<\/strong> You now start off with a higher amount compared to the day before. At the end of the second day, your interest is computed again for the day but this time based on your new, higher principle amount.<\/p>\n

Day three and beyond:<\/strong>\u00a0The same computation occurs like in the second day and continues perpetually until you cleared your account.<\/p>\n

\n

Example:<\/strong> If you owe RM10,000 and the rate is 18% p.a., your monthly interest would be roughly RM154<\/strong>,\u00a0that\u2019s RM4 more than if you were charged based on a flat rate! Due to the compounding effect, the actual interest rate you\u2019re being charged (also known as \u201ceffective interest rate\u201d) is roughly 19.7% p.a.<\/strong> and not 18% p.a.!<\/p>\n<\/div>\n

<\/span>What does this all mean?<\/strong><\/span><\/h2>\n

As a smart consumer, it is imperative that you do not plan your cash flow based on the advertised rate, simply because that\u2019s not how the numbers work.<\/p>\n

The supremely high rate aside (i.e. imagine how happy we\u2019d all be if our fixed deposits are paying us, say, 18% per year!), the compounding calculation method that these card companies adopt all add up to make this credit facility a very dangerous financial instrument for the undisciplined.<\/p>\n

The key takeaway here is to pay as much as you can (instead of as little as you can, which is what many people are doing) on your bills. After all, it simply doesn\u2019t make sense to subject yourself to obscene amount of financial charges – which is exactly what you\u2019ll be doing every single day as long as you have unpaid balance on your account.<\/p>\n

Use our credit card comparison table<\/a> to make a wiser decision in getting a Malaysia credit card that benefits and suits your buying behaviour!<\/strong><\/h3>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The consequences of not paying your credit card bills in full is huge and can possibly lead to bankruptcy for those who are not disciplined enough. One of the reasons why many people seem to be playing catch up with their ever increasing debt is the lack of awareness and education. To safeguard yourself from… View Article<\/a><\/p>\n","protected":false},"author":1,"featured_media":5437,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[11,227],"tags":[],"class_list":["post-4484","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cards","category-credit-card"],"acf":[],"yoast_head":"\nCredit Card Interest Rates: And Why It Can Make You Suffer<\/title>\n<meta name=\"description\" content=\"Find out how credit card companies calculate financial charges (i.e. interest) based on your outstanding credit card balance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.imoney.my\/articles\/credit-card-numbers\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" 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