Should you be using the credit on the Credit Card
The three (3) facts Credit Card issuers would not publicize to you are:
- Credit Card Interest rate are as high as 32+% per annum in Hong Kong.
To explain this simply: if you spend HKD10,000.00 and only pay minimum amount due you will pay interest of HKD 3,400 per month, if not more.
- It will take you 19 years and 11 months to repay the amount if you paid only the minimum amount every month. (*)
- You will pay back HKD 29,772.00 in total over the 19 years – thus your interest will be HKD 19,772.00. More than the principal of HKD 10,000 that you borrowed.
Should you borrow on a Credit Card after learning the above facts – absolutely NO!!
Credit Card has two key features:
- Enabling transaction without the need of cash at a store or a website; and
- Providing Credit i.e. Loan in case you do not wish to payback the full amount.
This article is dedicated to the 2nd feature of using Credit / Loan feature on your Credit Card.
Well, what alternative do I have if I need money to meet my needs now? This is a question we all should ask and take the following steps:
- Ask ourselves do we really need to buy what I am buying now?
- If the answer is yes, can I afford it? Will I be able to payback the money I borrowed to make purchases?
- If you have answered yes to both the above questions – then the question of interest rate, number of months over which you would like to payback and who to take the loan becomes critical.
As an ex-banker I always request customers to understand the terms of the loan properly in different circumstances. We will discuss the same in the next article.