15 July 2011

Do you need a credit card?

In Singapore and Malaysia, it is very common that every fresh graduates to own more than 2 credit cards issued from various banks. Oversea banks such as Citibank and Standard Chartered hire many salespersons to boost their credit card business in these countries.

According to the survey made by Malaysia Authorities, household debt levels in Malaysia reached a new high. Most of the debts are used for purchasing house and car. Unlike Singapore that has a probably one of the best public transport systems in the world, it is a need for Malaysian to go to work. When debt level increases, most of the citizens have to use their cash to pay on the mortgage loans and car loan. If this continues, my opinion is that it would reduce the level of savings as well as level of investing.

Credit card stands as a need for both Malaysian and Singaporean.
According to a survey, majority of Malaysian has the online shopping experience. I believe it is due to the convenience of online shopping experience and cheaper cost compared to offline trading. For example, most of the low cost carriers do receive their revenue streams from online booking.

It is very easy to get a credit card in Malaysia and Singapore. For Singaporean, what you need is just as low as SGD30K. For Malaysian, it can even be as low as RM24K. For these reasons, it is very easy to understand that majority of the Malaysian and Singaporean are having credit cards.

The Benefit of the credit card:
  1. Easy to bring whenever and wherever you like.
  2. Can be used as an ATM card when traveling oversea. Can reduce risk of bringing too much cash on hand.
  3. Can be used as an emergency fund when you have difficulty of cash flow. For example, you have to pay the hospital bills with credit card first before waiting for the insurance company to make the payment for your hospital bills. 
  4. Enjoys some privileges brought by the credit card co. For example, there will be some merchants co-operate with the credit card co to give you certain discount if you make the payment using credit card. 
However, we must be aware of the dark side of the credit card:
  1. It increases more debt if you over utilizing.
  2. It creates another burden if you cannot manage your cash flow very well. 

Credit card brings us benefits. However, we must also be aware of over utilizing it.

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