5 Things I Learnt From Using A Credit Card

About 3 months ago, I applied for a credit card. The application process was long because it needed me to have a slot in a university (which I do have) and they had some trouble. Okay but that’s not the point. My application was finally accepted and I received the card about a month later.

Maybank eVibes Credit Card

The credit card that I applied for was the Maybank eVibes Card. Here are the benefits are:

  1. Free Adidas wristwatch worth $120
  2. 1% cash rebate on all spend
This is a good card for students and NSF as you don’t need a minimum salary to be eligible. If you are looking for other cards, you can check them here in an article from MoneySmart.
The reason I applied for a credit card is not because I needed money (and that’s a very bad the reason btw!). I wanted to go through experience of charging something to the card, seeing it appear in the statement and then paying it off. Also, who doesn’t want 1% cashback! So from using the card for about 2 months, here are 5 things I learnt.

Charge Only A Small Percentage of the Credit Limit

The Credit Limit is the maximum amount that you can charge on the credit card. You won’t be able to charge more than the limit. The percentage of the amount that you charge on your card is called the Credit Utilisation Rate. The higher it is, the more you charged on your card. For example, if the credit limit is $500 and you charge $250 on it, your Credit Utilisation Rate is 50%. Best is to keep it around 10% to 20%

There are 2 reasons why you should not charge too much on your card.

Firstly, your credit score. Your credit score is basically a grade that you have to indicate what kind of a borrower you are and how likely are you to repay the money you borrowed. If you charge a very high percentage of your credit limit, let’s say 80%, it might mean that you are someone who is financially troubled. This could make your credit score go down.

Secondly, it just makes sense that by charging lesser, you spend lesser! And everyone knows it’s wise to save your hard-earned money.

Track How Much Is Charged On The Card

Know how much you have spent on the credit card. If you’re like me and budget, you would have a certain amount of money that you can spend. And you don’t want to go over budget.

But one thing that I have noticed about myself is that when I checked my bank account, it shows that I have quite a bit of money. But when I check my budget, it shows that it’s lower. Seeing the amount in the bank account might make me feel that I have more money to spend than what I actually have. This is due to the separate accounts of my bank account and the credit card account.

So what I do is that I have a table in my budget to show the amount charged on my credit card. This way, I will know how much exactly I have left to spend. This prevents any chance of me accidentally buying things when I didn’t budget for it.

Indicating the amount I have left for my budget and the amount in my bank account

Also another reason is that it’s good to always check your statements, same with your bank accounts. This is so that if there were to be any unauthorised charges, you can report it to the bank.

Statement Date and Due Date

Once you have had enjoy charging all the things to your card, towards the end of the month, you will receive your statement. It details a lot of things. 2 important things to take note of is the Statement Date and Due Date. They look something like this:

Statement Date and Due Date
It is important to know what these mean because it can affect when and how your interest will be charged.
Statement Date is the “cut-off” date for your transactions. This means that what you need to pay for the current month is whatever is before the date. Anything after, will be brought over to the next month for you to pay.
Due Date is the basically the last date that you can pay for the current month’s bill. If you pay after this date, interest will be charged and it will be the start of a lot of horror!

Total Due and Minimum Due

This is where things can get a little confusing for some people. When you receive your statement, there will be 2 numbers that might appear.  They are called Total Due and Minimum Due. They look something like this:

Total Due and Minimum Due

First you will see the Total Due. As logical as it sounds, it literally means the total you have to pay in order not to incur interest. That last part is most important. You have to pay this amount to reap the full benefits of a credit card and not fall into the debt trap.

Then you will see the Minimum Due. You might think “wait I can just pay this minimum and get away with it???”. Well you could, but you shouldn’t. This minimum due is to ensure that you pay the bank their money back, but at the same time they will earn money from you. They will charge you a late payment fee, which can be quite a big amount!

Pay In Full and Pay 0% Interest

PAY IN FULL, NEVER LESS. As I start using a credit, this is a reminder I tell myself. As discussed previously, any payment lesser than the full payment would result in interest being incurred. Let’s take my previous month’s example. In the statement, they state what would happen if I only paid the Minimum Due:

Paying only the Minimum Due

My total due was $126.88. But if I were to pay only the minimum, the total I would have to pay is $139.97. This means that I would pay $11.09 in interest. This might seem a little, but if you drag your payments, miss any payments, it will snowball and become one big problem. This is due to compound interest!!

So the life pro tip here is that you should only spend money that you have, and pay it in full. Interests are not fun, especially when they compound!

Closing Words

So that’s about it. It’s fun to have a credit card cos it looks sleek and all. But it can be dangerous if not used properly.  Should you get one? Maybe, it depends on your spendings. If you do get it, I hope these 5 things will be something that you will remember. Hope you learnt something new!

“With Great Power Comes Great Responsibility”