BolehCompare's Guide For Credit Cards In Malaysia.


What are Credit Cards?

Issued by banks like HSBC or consumer finance companies like AEON Credit, credit cards in Malaysia behave in the same way as they do in other countries. Credit cards are plastic cards that given out to consumers (also referred to as cardholders) to buy goods and services on credit or receive cash advances. The issuer typically limits the maximum amount a month that can be spent on the credit card. This is known as the credit limit and is normally based on the cardholder's monthly income.

How do Credit Cards Work?

The main parties that are involved in the credit card transaction are

Cardholders: You or any other authorized persons (e.g. supplementary cards given to children and spouses) who can use the credit card to make payment for goods and services.

Card Issuers: These are the institutions that issue the credit cards. Banks and consumer finance companies are the main credit card issuers in Malaysia.

Credit Card Organisation: These are organisations that license card issuers to issue credit cards and act as settlement intermediaries between card issuers and merchant acquirers. Visa, MasterCard, China UnionPay and Japan Credit Bureau (JCB) are all global credit card organizations that are active in Malaysia.

Merchant Acquirers: Institutions, usually local banks, that process credit card transactions for merchants. They usually provide the merchant with a point-of-sales terminal which automates and authorizes the credit card transaction.

Merchants: Firms that sell products or offer services and accept credit cards as a form of payment. Millions of retailers around the world accept credit cards, making them truly a very convenient payment method.

In Malaysia, most of the major retailers and restaurants accept credit cards. However it is not uncommon for smaller shops and diners to offer better prices if you decide to pay in cash or they might charge an extra fee for a credit card transaction. It is best that you check if there any additional credit charges when you are bargain hunting!


What are the Major Types of Credit Cards available in Malaysia?

  1. General Purpose Local Currency Credit Cards: These are your normal credit card issued by banks that allow you to pay in Ringgit Malaysia (RM). These cards are often categorised as platinum, gold or classic cards based on the cardholders' income brackets. Upon request, supplementary cards are issued to another person close to you like a spouse or a child. Note that any foreign currencies denominated transactions using these cards are converted to Ringgit Malaysia (RM). It is common for credit card issuers to include a foreign transaction fee (typically 1%-2% of transacted) in addition to the foreign exchange bid-ask spread. If you have one of these, you might want to be careful when shopping online or paying for any goods in other currencies because the foreign transaction fees can add up.
  2. General Purpose Multicurrency / Foreign Currency Credit Cards: These credit cards are similar to the general purpose local currency credit card but offer the added convenience of making payments in other specified currencies without incurring additional currency conversion fee. These types of credit cards are becoming increasing popular especially in a global business hub like Malaysia. For example, many card issuers in Malaysia offer the China UnionPay dual currency (Ringgit Malaysia (RM) and Renminbi) credit cards that are popular with business and leisure travellers who frequently visit China.
  3. Affinity or Co-Branded Credit Cards: Some merchants and non-profit organisations (e.g. professional bodies or registered charities) team up with card issuers (e.g. banks or consumer finance companies) to issue general-purpose credit cards with their name and logo displayed on the card. These cards are known as affinity or co-branded cards. The card issuer (e.g. HSBC) usually compensates the merchant or non-profit organisation to access and market the credit card to their pool of customers and members.

    The names of the card issuer (e.g. HSBC or Citibank) and the credit card organisation (e.g. Visa) are usually printed on the affinity cards. Affinity or Co-Branded Credit Cards, just like general-purpose credit cards, are widely accepted globally as it is supported by the credit card organisation's network (e.g. the global merchant network of Visa or Mastercard).

Private Label (Store) Credit Cards: Sometimes, banks might work with large merchants (usually large department stores or retail chains like Harvey Nichols) to directly issue private label credit cards. Cardholders usually enjoy exclusive deals from the partnering merchants. Note that these cards usually do not carry a credit card organisation logo like Visa logo. Private label credit cards are not usually widely accepted and you are usually restricted to use the credit card in stores that associated with the issuing merchants.


What are Cash Back Rebates and Loyalty / Reward Points?

Most credit card issuers offer some incentives to attract and reward loyal cardholders. Two of the more popular incentives are cash back rebates and loyalty points.

Cash Back Rebates: Every time you spend with your credit card, you will be eligible for a predetermined rebate amount on your transaction. After a period of time, usually a year, the accumulated rebate amount will be credited to your credit card account. The cash back rate is generally around 1% to 2% but a wide range of cash rebate terms will apply. For example, cash rebates may be tiered by spending categories i.e. higher rebates on dining spending than retail spending. Alternatively the cash back rates might be tiered based on cumulative spending over a certain time period. There are even issuers that offer higher cash rebates on overseas and online spending.

Please refer to our table that provides a summary comparison of all the cash rebate terms in order to select the best option based on your spending habits and needs

Loyalty / Reward Points: The loyalty scheme is similar to cash back rebate except that you are rewarded with loyalty/reward points instead of a cash rebate. Depending on the card issuer, the loyalty/reward points can be redeemed either as frequent flier miles or gifts (e.g. consumer electronics goods). Note that different card issuers have varying terms when it comes to redeeming your loyalty/reward points. Some card issuers allow accrued loyalty/reward points to be carried forward indefinitely and others have an expiry period after which unredeemed points are forfeited.

Please check our comparison table for a quick summary and details of the incentives offered by the card issuers.


What are the important things that I need to keep in mind when choosing and using a credit card?

  1. Annual Percentage Rates (APRs) and Monthly Interest Charges: Credit Card Issuers usually use APRs, which might take into account both interest rates and other charges, to calculate your monthly interest charge. An interest charge calculation for a credit card transaction might be as follows:

    Value of Credit Card Transaction X Daily Percentage Rate X Number of Days where Daily Percentage Rate is APR divided by 365 or 366

    APR is the best reflection of your cost of borrowing using a credit card. APR is a useful tool to compare personal loan and credit card offers. The average APR for credit cards in Malaysia is around 35%; however, your actual APR will depend on your creditworthiness. Cardholders with better credit scores and payment histories will be eligible for lower APRs.
  2. Make the best use of the Interest Free Period: Payment for credit card purchases of goods and services are normally due after a free credit period. As long you pay your credit card balance in full before or on the payment due date, no interest or finance charge will be imposed. Savvy consumers benefit from wisely using this free short-term credit offered by credit cards.

    Please note that if you have any unpaid balances from the previous month, you will not be eligible for the interest free period. Further, any cash advances using credit cards have no interest free period and interest is charged from the date of the withdrawal. So, make sure you use your credit card to withdraw cash only in emergencies. The interest free period offered varies by credit card issuers. Use our comparison table to identify the longest interest free period that is available.
  3. Understand all the Fees: Please read the fine print in the application form to understand all the additional charges and fees associated with the credit card. Some of the fees that you might want to check on include annual fees to maintain the credit card account, late payment charges, charges and fees for exceeding the credit limit and for handling foreign currency transactions, and handling fees for cash advances or returning purchased goods. The credit card market in Malaysia is highly competitive and most issuers offer promotional waivers on fees and charges. Please look up the most competitive offers in our comparison page and don't forget to sign up for our newsletter for future alerts.
  4. Supporting your Spending Habits & Lifestyle Needs: You need to find the right credit card that fits your spending habits and lifestyle needs. Lowest fees and competitive APRs are not the sole criteria in your decision. For example, if you are a frequent business traveler, you might be interested in getting an airline affinity credit card that might offer additional benefits like free airport limousine transfer services, complimentary travel insurance or access to exclusive airport travel lounges.

We at BolehCompare are all about helping you manage your personal finances better. With our comparison engine, we have made it easy for you to research and the compare the best credit card offers in Malaysia. Use BolehCompare and find the credit card that offers the most competitive rates and that meets your personal needs!



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