Credit card debts are one of the reasons that has led Malaysians into bankruptcy, recent statistics show.

According to a record by the Malaysian Department of Insolvency, over 95,000 individuals have been declared bankrupt between 2014 and 2018, and credit card-related cases accounted to 9.91% of the cases.

Other factors include personal loans (27.76%), hire purchase (24.73%), and housing loans (14.09%).

What is a credit card?

A credit card allows you to pay for your purchases without using cash. Your cedit card issuer will pay the merchant on our behalf, and then bill you in a monthly statement.

Why should you pay the amount due on time?

From the posting date of your monthly statement (purchases only), you have 20 days, usually, to make charges-free payment. Even if you can't pay the amount due on time, paying at the least the minimum (5% of the amount due) on time would entitle you to low charges-rates, tiered as below (rates differ between banks):
Repayment track recordCharges
Cardholders who promptly settle their minimum payment due for 12 consecutive monthsUp to 15% per annum
Cardholders who promptly settle their minimum payment due for 10 months or more in a 12-month cycleUp to 17% per annum
OthersUp to 18% per annum

What happens if you don't pay off your credit card bill on time?

As mentioned, if you make partial or minimum payment, applicable charges will apply.

Paying only the minimum payment each month will cause the applicable charges to accumulate, making it longer for you to settle your outstanding balance.

For example, if your outstanding balance is RM1,000 and the applicable charges rate is 18% per annum, it would cost you RM198 in charges and approximately 2 years to settle your total debt, if you are just making the minimum payment.

What happens if you fail to pay the minimum payment on time each month?

Late payment fees will be imposed on top of the applicable charges.

What happens if you default on your credit card repayments?

30 days - You will receive reminder calls. Besides late payment fees and applicable charges, your CCRIS will record a 1-month default.

30-60 days - Second reminder via letters and phone calls. Your CCRIS will record a 2-month default and your card will be blocked.

60-90 days - Your card will be frozen until an agreed sum of payment is made while a legal letter (arising charges may be borne by you) will be sent demanding full settlement.

Beyond 90 days - The bank may engage a debt collection agency. But don't worry. They are not allowed to harass, harm or threaten you.

Last resort - Bank may take you to court which could lead to bankruptcy (amount owed is more than MYR 50,000) while this is recorded in your CTOS.

Is there a solution for defaulters?

You may negotiate with the bank to convert the debt into a term loan or other similar arrangement to make payments affordable over a period of time.

AKPK - If you have more than one credit card or if you can't afford the term loan afforded by the bank, consider AKPK's Debt Management Programme to restructure your credit card debt repayments.

Liquidating assets - As an option, you may retook at your assets and see if there are any that can be liquidated to pay your debts.

Bankruptcy - If you really can't afford to do anything to improve your situation, as a last resort, you may file for bankruptcy to protect yourself from creditors' claim that you know you can't satisfy.

This article is brought to you by AKPK

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