Me and my credit cards

Saturday June 13, 2009
Me and my credit cards
A Question of Business
By P. GUNASEGARAM


Credit cards are convenient but watch out for all the charges or you will end up paying much more than you bargained for.

OUR cover story deals with credit cards and highlights some of the major problems with this even if it is such a convenient tool for payment. The fact is that if you don’t use it right it could cost much more than you think.

Over the years I have had some experience with credit and charge cards and it has been an enlightening one. I realised that not all credit cards are created equal and picking the right ones can save a lot of money and heartache.

My first card was a charge card, not a credit card. That meant that I had to pay in full the outstanding amount every month. The card was from one of the large charge card issuers at that time – 1982.

I had no complaints with them largely. If occasionally I was late with payment, they were quite happy to waive the late payment penalty charge. The problem was they were not widely accepted as the credit cards – the two mains ones being Visa and MasterCard.

And so I applied and obtained a Visa card from a large local bank in the mid-80s. I had no problems until I had to go to the US for nine months in 1987/88. I tried to work out an arrangement with the bank so that they could still bill me in ringgit and I would write a cheque to them from my Malaysian banking account.

You know what they did? They promptly terminated my credit card. I swore that I would never again take another credit card from this bank, which still has problems becoming an international player! And this bank actually had a branch in New York, where I was going to be located.

I had no problems with the charge card though. They were quite happy to let me have the card and pay in ringgit via my Malaysian banking account.

For my credit card, I opted to get a Visa credit card from a large American bank instead. I have this card to this day.

Later, I took on another credit card, the main reason being its five-year no-fee period. Even after the expiry of the no-fee period, they were quite happy to waive annual fees if I asked them. I still have the card.

But then I made two successive mistakes. Attracted by an offer, I succumbed to a credit card from a large foreign bank which offered a gold card with one-year fee waiver. In anticipation of a short overseas trip, I asked them to temporarily increase my credit limit.

They were not forthcoming. Upset by their lack of trust and commitment towards me, I terminated them the following month.

More recently, I took a housing loan with one of the large foreign banks. The bank, unsolicited by me, sent me a credit card. I used it for a while and then noticed that they slapped me with a hefty 1% charge on outstanding balance when I was late with a minimum payment.

Effectively, the interest rate, in annual terms, on the minimum sum due became a hefty few thousand per cent because the 1% was charged on the outstanding balance and not the minimum sum unpaid. How unfair, I thought. And how lucrative for the bank.

But I noticed that not all the other credit card companies were imposing charges similarly although the lopsided agreement allowed them to do so. I terminated the card after my second penalty charge.

Lately, I was attracted by one bank’s no annual fee for life! Now we are talking I thought. But this bank has offended me by charging a 1% surcharge for overseas sales. Why?

If I spend RM20,000 holidaying overseas, I will have to pay RM200 in extra fees. That’s more than the annual fee for most ordinary cards. But I will do the smart thing – in future I will use this card only for local expenses and use another card for foreign expenses.

Meantime, my original charge card company, now taken over by a large local bank – yes the same one that cancelled by Visa card – declined payment on one of my overseas trips. Now, that just won’t do and I am seriously thinking of terminating this card.

That’s just my own experience. After reading the cover story, I am sure most of you will agree that this industry needs some close regulation before it gets out of hand. They are already doing it in the US and elsewhere.

l Managing editor P. Gunasegaram publicly swears he is going to use his credit cards and choose his banks much more wisely from now on.