Credit cards are one of the major payment methods for our everyday spending. Using a credit card to shop entitles you to interest-free repayment period, it also avoids the hassle of carrying a large amount of cash. However, you need to understand the banks’ terms and conditions, and their fees and charges when spending with credit cards. As a wise bank customer, you should remember the following tips when using your credit card:
Do not underestimate the interest burden if you only repay the “minimum payment amount” or make partial repayment.
For example: Assume there is an outstanding balance of $20,000 in your credit card account without further transactions, annual fee and other fees, and a monthly interest rate of 2.5% (Annualised Percentage Rate (APR) of 35%).
|Repayment Amount Per Month
|Time Required to Clear the Outstanding Balance
|Minimum Payment Amount
(less than $849)
Note: A similar illustration appears in banks’ monthly credit card statements.
Be aware of the distribution method and the issue date of a monthly credit card statement. Read and check whether each transaction of the statement is correct. In case of any suspicious or unauthorised transactions, inform your bank promptly.
The maximum amount approved by a bank to a customer for spending with a credit card, or for cash advance through the credit card.
The date by which a customer needs to pay.
The sum of all interest, fees (including annual fee) and at least 1% of the outstanding principal, or a specified amount (e.g. $50), whichever is higher.
The APR, expressed as a yearly percentage rate, is a benchmark for comparing the interest rate and fees for different banking products (e.g. credit cards, personal loans, etc.). It reflects the actual cost of borrowing.
A finance charge will be levied if a customer fails to repay the outstanding balance of retail purchases or cash advances on the payment due date.
If a customer fails to make the minimum payment amount by the payment due date, a late charge will be levied. The amount is normally equal to the minimum payment amount or a certain percentage of the minimum payment amount. Minimum and maximum charges may be imposed. In any case, a late charge should not exceed the minimum payment amount.
Other fees may include the over-the-limit fee. It will be charged by a bank when the total outstanding balance of a credit card account exceeds the credit card limit*. It is normally a flat fee.
Banks generally offer reward programmes to encourage customers to spend more by using credit cards. Such programmes are subject to specific terms and conditions. The bonus points accumulated are subject to a validity period. For more information, please refer to the monthly credit card statement or check with the relevant bank.
Note: The format of the statements and the calculation methods of the fees and charges by different banks may vary. For any queries on your credit card statement, please contact the relevant bank.
Credit card chargeback protection is a protection mechanism provided by credit card associations to consumers. Generally speaking, where consumers use credit cards to make lump-sum payments upfront, and have disputes over the transactions later on, consumers can request card issuing banks to assist in applying for refunds of the payments.
Examples of disputes:
All prepayments involve risks. Think carefully before prepaying.
Chargeback protection is generally not applicable to instalment payment plans (IPPs) on credit cards.
Terms and conditions of IPPs may vary by card issuing banks. It is better to understand them thoroughly and assess your own situation before signing any agreements.
The consumer approaches the card issuing bank to raise a chargeback request.
On behalf of the consumer, the card issuing bank raises the dispute and chargeback request with the merchant acquirer through the credit card association. The merchant acquirer or the merchant may accept or reject the chargeback request, in accordance with the rules of the respective credit card association.
Chargeback request accepted:
Transaction payment will be refunded to the consumer via the card issuing bank.
Chargeback request rejected:
The consumer may submit the disputed transaction, via the card issuing bank and in accordance with the rules of the respective credit card association, for arbitration by the association.