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Should you be using the credit on the Credit Card

By on February 13, 2018 0 200 Views

The three (3) facts Credit Card issuers would not publicize to you are:

  1. 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.
  2. It will take you 19 years and 11 months to repay the amount if you paid only the minimum amount every month. (*)
  3. 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:

  1. Ask ourselves do we really need to buy what I am buying now?
  2. If the answer is yes, can I afford it? Will I be able to payback the money I borrowed to make purchases?
  3. 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.

Keep reading.

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