Credit Card Declined? Eight Possible Reasons.

Understanding why your credit card was declined is the first step in preventing it from happening again. Lack of funds, international purchases, or simply an expired card could be to blame.

The English language has seven words, which, when spoken together, will nearly always ruin the day of the person on the receiving end of them. That fateful sentence? "I'm sorry, your card has been declined."

 It can happen without warning. Maybe you're at Starbucks, ready to enjoy your morning coffee, or at Best Buy, about to buy the perfect Christmas present for your husband. No matter the situation, when the clerk hands you back your credit card with a shaking head and an apologetic smile, that sinking feeling in your stomach is universal.

Understanding why your card was declined is the first step in preventing it from happening again. I polled the finance experts here at Brad's Deals, and came up with a list of the eight most common reasons why a credit card would be declined:

1. You lack the funds or you've reached your credit limit.

The most simple explanation for a declined credit card is a lack of funds. Most credit card companies will not allow you to make purchases that will push you over your credit limit, so if you haven't been paying close attention to your credit card statements, or haven't made a significant payment in a while, that cap can come up quicker than expected.

This is a problem for debit card users as well, especially if you have overdraft protection enabled on your checking account. While having your debit card declined might be better than overdrawing your account and having to pay the steep overdraft fees charged by your bank, it's still an embarrassing inconvenience.

Avoiding being declined for this reason should be easy enough: just keep better track of your finances. Paying off your credit card in full every month can help you build credit while at the same time stopping any surprise card declines in their tracks. If you can't do that, make a habit of checking your credit card statement or bank balance online before you buy anything. If you don't have the money, you can't make the purchase--it's as simple as that.

2. Your account is delinquent.

Even if you haven't yet reached your credit limit, if you've missed some payments on your card, your credit card company could put a delinquent stamp on your account and prevent you from spending any more until you pay up. If you have really good credit, the card issuer might give you some slack and let you miss multiple payments before they cut you off, but if your credit report is marred with delinquencies, they'll probably put a stop to it after just one or two missed payments.

Having a delinquent account can really do a number on your credit, so if your card is declined for this reason, fixing the problem should be a priority. Pay off your delinquent balance ASAP or face serious credit problems in the future.

3. Misplaced fraud prevention

Make sure you call your credit card company before you take a big trip!

To prevent you from being a victim of identity theft, most banks and credit card companies monitor your spending patterns and locations to ensure that you are the one using your card. If they see purchases being made that don't fit the bill, they might freeze your account. While this is helpful if someone steals your wallet in Minneapolis and then tries to spend $500 the next day at a Target in Chicago, it can be a hassle when traveling or making large, out-of-character purchases.

So if you live in Boston but plan on vacationing in California, call your bank or credit card company before you get on the plane. They'll make a note of the fact that you're going out of state, and green light all the purchases you make while you're there (within your credit limit, of course). Same goes for big buys, like a TV, a down payment on a car, etc. If you're planning on buying something expensive that's not something you'd typically purchase, let your credit card company and bank know beforehand just in case. They might not freeze your account in all cases anyway, but it's better to be safe than to have your card declined while trying to buy something you really want or need.

4. You're making an international purchase.

Making online purchases from a foreign company is another way to set off your bank or credit card company's fraud alarm. While it might be tedious, giving your credit card company a heads up before you make a foreign transaction is probably your best bet. And always make sure to vet overseas websites to make sure they're legit before buying anything from them--online shopping can be a veritable landmine of identity theft just waiting to happen, so make sure you know what you're getting into before giving out your credit card number.

5. There's an authorization hold on your account.

A lot of businesses, like rental car companies and hotels, will put holds on your account when you make your reservation, which can sometimes be as much as a few hundred dollars. While you'll get that money back (when you return the car dent-free or check out without having damaged your hotel room beyond repair), if you're close to your credit limit when you make the reservation, the authorization hold could push you over the top, and cause your credit card to be declined.

It's a good idea to make sure you've got ample credit available before making a purchase or reservation with a company that will put a hold on your account, and you should always ask and make a note of how much the hold will be, and how long it will last so you don't end up getting a surprise decline.

6. Your card is expired.

When you first get a credit card, the expiration date can seem like a long time in the future. Most cards typically expire two to three years from the day they were issued, but if you're not keeping track, those expiration dates can really sneak up on you. If you try to use a card that's expired, it's going to get declined. Some credit card companies stay on top of this stuff and send you a new card in the mail before your old one expires, but others expect you to update your account yourself.

To avoid having your card declined because it's expired, make sure you're up to date on the expiration dates of all your credit and debit cards. If they're almost up, call up your card issuer and ask for a new one. Simple as that.

7. You made a typo on an online form.

I tried to order lunch online yesterday and my debit card was declined. I was worried for a minute, but then remembered I had recently moved and updated my address on my card's account. When filling in the online form, I'd put in my old zip code out of habit, not the new one that was actually attached to my account. This is an easy mistake to make, even if you haven't recently changed your address. Careless typos or even extra spaces left in the address box can cause your card to be declined, so next time you shop online, make sure to double-check that all your info is correct before you press the "order" button.

8. Your bank or credit card company is having technical issues.

Sadly, banks and credit card companies occasionally experience technical issues that interrupt their customers' card service in a certain area, or even across the world. When this happens, there's really nothing you can do but wait it out. Most banks and card issuers take this problem very seriously and will fix it quickly, but in the meantime, you won't be able to make purchases with the affected cards. The best way to be prepared for situations like this (and every other one on this list, too) is to bring back up--be it cash, another card, or a checkbook--you should always have a few different ways to pay on you so you don't get stuck in a sticky situation.

Has your credit card ever been declined? How did you handle it?

To Combat Fraud, Visa Wants to Track Your Smartphone

Visa

NEW YORK -- Those days of calling your bank to let them know that, yes, you really are in Thailand, and yes, you really did use your credit card to buy $200 in sarongs, may be coming to an end.

The payment processing company Visa (V) will roll out a new feature this spring that will allow its cardholders to inform their banks where they are automatic, using the location function found in nearly every smartphone.

Having your bank and Visa know where you are at all times may sound a little like "Big Brother." But privacy experts are actually applauding the feature, saying that, if used correctly, it could protect cardholders and cut down on credit card fraud.

Credit and debit card fraud costs consumers and banks billions of dollars each year, and that figure has been growing as data breaches have become more common. The banking industry had $1.57 billion in debit card fraud in 2013 and $4 billion in credit card fraud in 2012, the latest years for which data are available, according to the Federal Reserve.

Facing these high costs, banks and the payment processors have been stepping up their efforts to cut down on fraud, and Visa's announcement is just one small piece of this drive. JPMorgan Chase (JPM) CEO Jamie Dimon has said repeatedly that his bank spends $250 million overall on cybersecurity every year and plans to double that spending.

Tracking Purchases

Here's how it works: starting in April, banks will update their smartphone apps to include Visa's new location-tracking software. If the consumer opts in, the Visa software will, over a period of time, establish a customer's home territory of roughly a 50-mile radius. If the person uses his or her Visa card at stores in that area, those transactions will be considered low risk for fraud.

When that person travels outside their home area, the phone will notify Visa that they've entered a new city or country, using either the phone's cellular data plan or the next time the phone connects to a Wi-Fi network. When that person uses their Visa card for a transaction in that location, Visa will already know he or she is there and will be less likely to flag the card for a fraud alert.

"We will be able to compare the merchant's location to the most recent cellphone location to show it's a less risky transaction," Visa executive Mark Nelsen said.

The feature is optional and can be deactivated at any time. Visa also says none of the location trackings will be used for marketing purposes.

Combating Counterfeit Cards

One type of fraud Visa's feature will directly address is counterfeit credit cards. Criminals can take stolen credit card information and code it onto a new card using equipment that can be readily purchased online. Counterfeit cards look like any other credit card but have someone else's information on the magnetic stripe.

Nelsen said Visa hopes the new security feature will prevent "a good portion" of fraud perpetrated with counterfeit cards because those cards are often used in a location other than where the actual card owner lives.

Visa's new anti-fraud measure, which the company announced Thursday, won't address every potential fraud situation. If a card user has both their phone and credit cards stolen, for example, Visa wouldn't necessarily know that the card was at risk of fraudulent use until the cardholder contacted the company.

The current version of Visa's anti-fraud software doesn't address the possibility of stolen credit card data being used to make online purchases, but a future version will Nelsen said.

Visa is just one of the dozens of financial companies trying to figure out the best way to use new technologies to combat fraud. MasterCard (MA) said Friday it is rolling out a pilot program later this year that will integrate biometric data, such as face, voice or fingerprints, into its payment system to help authenticate transactions.

Cumbersome Process

Many travelers have had the experience of having their credit cards declined when using them for the first time in a foreign city or country because the bank assumed the charge was fraudulent. The only solution in those situations was for the cardholders to call the banks or credit card issuer every time they travel to let them know where they will be.

The process is cumbersome and time-consuming for cardholders and also for banks, which incur large expenses to staff call centers to deal with these types of calls from customers. Some banks use systems like text message alerts, but that usually requires customers to reply or call a number before the transaction will go through.

"The goal is to let more of those good transactions go through so we can focus on the real fraud," Nelsen said.

Privacy experts were generally warm to the idea, as long as banks are clear on how a customer's smartphone location will be used.

"When a trusted party -- and I think people think of their bank as a trusted party -- is looking out for you using what technology they have, I think people will welcome that," said Jules Polenesky, with the Future of Privacy Forum. Polenesky said Visa approached him six months ago to get feedback on this idea and to address any privacy concerns.

Justin Bookman, director of consumer privacy at the Center for Democracy & Technology, also supported the feature as long as banks are clear it's optional and how the data is being used.

"We effectively share our location with our banks every day when we swipe our credit cards," Bookman said. "As long as it remains optional, I believe it's a worthwhile idea."

Source:https://www.latimes.com/business/la-fi-visa-security-20150213-story.html

Tax Payment by Credit Card Lauded

Tax Payment by Credit Card

KUALA LUMPUR, March 3. 2015: 

The Association of Islamic Banking Institutions Malaysia has lauded the use of credit cards to pay income tax, saying it would help avoid penalties while the government benefits from direct tax collection.

President Datuk Mohd Redza Shah Abdul Wahid said the initiative by the Inland Revenue Board (IRB) provides taxpayers with a convenient mode of payment.

“I think it is a good move by the IRB because the more the channels of payment that exist in the payment system here (the better) it is for people to meet their obligations.

“Of course credit will incur but those with no time to go to the IRB can go to the bank and make their tax payments via credit card. This will definitely ease the taxpayers.”

Taxpayers can plan their financing accordingly when using the credit facilities, he said in a phone interview.

Yesterday, the government announced that taxpayers can make their income tax payments via Visa, MasterCard or American Express credit cards as well as debit cards issued by banking institutions in the country.

IRB expects the new initiative to increase online income tax transactions to 25% compared to 12.13% of the 7.53 million tax payment transactions recorded last year.

IRB recorded a tax collection of RM133.694 billion in 2014, up 3.6% from the previous year.

The government and IRB are confident that the new initiative will see direct tax collection reaching RM142.646 billion this year despite external challenges such as falling oil prices and the Goods and Services and Tax implementation in April.

4 Reasons to Pay Your Credit Card Bill Before It's Due

Paid in full

There are many good reasons to never pay your credit card bill late, but are there any good reasons to pay it early? It would seem to go against all common sense to send in a payment well before the due date, but the more you understand about how credit cards and credit reports work, it can be smart idea under some circumstances. Here are four reasons why you might consider paying your credit card early.

1. Save Money on Interest Charges

When you carry a balance on your credit card account, you accumulate interest charges each day, based on your daily balance. So when you make a payment before the due date, you are lowering your average daily balance, which can reduce your interest charges significantly. Also, think of it this way: Since you earn very little interest from keeping money in a checking or savings account, but pay much more for that high-interest credit card debt, you stand to save money in the long run by making payments to your credit card as soon as possible. If you want to know how long it will take you to pay off that balance, this calculator can help you.

2. Improve Your Credit Score

When your statement period ends, and a statement is issued, that balance is reported to the major credit reporting agencies as debt, even if you ultimately avoid interest by paying your balance in full by the due date. That reported debt can lower your credit score if your balance is high during a particular month. By paying off all or some of your balance before the statement cycle even closes, you can reduce your debt-to-credit ratio and improve your credit score (you can see how this factor is affecting your credit scores by checking your free credit report data on Credit.com). This can be an especially important factor when you are applying for a home mortgage or another line of credit.

3. Pay Off Your Debt Sooner

By making an early payment, you are committing your funds to pay off your debt, rather than merely planning on doing so in the future. Without having those funds available for other discretionary expenditures, you are unable to change your mind and spend the money elsewhere.

4. Free Up Your Line of Credit

If you anticipate making a large purchase, you can quickly use up your line of credit before payment is even due. This is especially true when you consider that the typical statement period is about 30 days long, and your grace period, the time between statement closing and the payment due date, can be 21 to 25 additional days. And if you are traveling and have holds placed on your account by hotels or rental car agencies, then you may have even less of your credit line available by the time the due date arrives. By making early payments, you can free up your line of credit and ensure that all of your charges are approved.

When Not to Pay Your Bill Early

While there may be some very good reasons for cardholders to pay their bills early, it won't make sense for everyone. If you are always avoiding interest by paying your statement in full, and you aren't using a large amount of your credit line, then waiting until just before your due date to make a payment can be ideal. In this situation, you aren't saving any money on interest charges, and your funds will remain available to you in your bank account for as long as possible.

Credit card declined? – It could be one of these 8 reasons

Card Declined

Intro:

Our life revolves around money. These days it is simplified to carrying a debit or credit card. While it makes our life simpler, many a time it can be a bummer, especially when you are in a store in front of people and trying to make a payment and the swipe gets declined.

Story:

With our increasing dependence on credit and debit cards, we have grown used to not carrying cash around. We have also realised the importance of credit cards over cash. But, when you are out there throwing a dinner party to your friends and try to make a credit card payment and if the transaction gets declined, it can be an embarrassment.

There are many reasons why a credit card swipe can be declined. We have listed the top eight reasons for such a refusal of payment:

1. Credit Limit: Oh yes! This is the most common reason and all credit card users sure know this one. We have a fixed credit card limit (the maximum amount you can spend on your card preset by the issuer during the issuance), which if we cross or are very close to crossing could cause a decline of payment. Keep a track on your spending and keep in mind your credit limit to prevent such a situation.

2. Uncommon purchase: You have only used your credit cards to make bill payments online and suddenly you swipe to buy expensive jewelry of Rs 50,000, this transaction will be rejected even if you have enough credit limit. The reason why such a purchase can be declined is that your credit card company thinks that it is unusual for you to do such a purchase. Some transactions like buying gold; electronics and cash withdrawals will be declined if your credit is constantly used for smaller value swipes.

3. Invalid card: If you are using an add-on card that gets declined, it is possible that the primary cardholder has either reached the maximum account limit or has closed the account.

4. Change in terms and conditions: Do you have multiple credit cards from the same bank? If you default payment on one of those cards, it is possible that bank has blocked the other cards. In such an instance your swipe will be declined. Even if you have multiple cards from different lenders, banks randomly pull your Cibil credit score to take a relook at the creditworthiness. If the bank feels it has to lower your limit, it will give you a notice and do so.

5. Unknown location: If you live in India and if there is a credit card swipe in, let’s say Russia. This transaction will be declined because historically, all your swipes have been in India, the lender will assume it is a fraudulent transaction. So if you are travelling abroad, it is a wise step to call your credit card company and inform them about your scheduled trip.

6. Unusual currency: If you have always made bought in rupees and suddenly if you use your card to buy a ticket online in dollars that too with a heavy amount, this transaction is bound to be declined. Call your credit card company and give them a heads up before making such a purchase.

7. Technological reasons: These days, most of the new credit cards that are being issued come with an inbuilt chip. Now, to clear such a transaction, you need to key in a PIN number. Sometimes the merchant may be using a point of sales (PoS) machine that is outdated or if you have forgotten your PIN number or if your credit card is new and if you have not yet registered your PIN number, the transaction could be declined.

8. Wrong data: If you have entered a wrong billing address while buying a product online, or if you have entered a wrong credit verification value (CVV) or a wrong code for a 3D secure password, the transaction will be declined.

So, if you ever face a situation where your card transaction is declined, it is advisable to call your bank and check with them for the cause. In most cases, unless it’s a fraudulent issue, the problems will be resolved on the phone. Also, make sure you do not swipe the card again if it is declined. After three continuous declines, the bank may block it suspecting fraud. Keep your phone number updated with your credit card issuing bank, as the bank will alert you every time there is a swipe. Lastly, save the customer care number of your bank on your phone so that, when you are in a hurry to call them, you don’t run from pillar to post.

10 Things You Don’t Do With Your Credit Cards

David, a 49-year old father of three, lives in Kuala Lumpur. He holds a high position in the Management of a large corporation in the city and his income is more than RM 90,000 every year. He lives a lavish life – driving luxurious cars, dining in expensive restaurants, living in an upscale area, and sending his children to expensive private schools.

On the surface, it seemed like David’s family led a great lifestyle, filled with many international vacations and expensive materials. However, in addition to the family’s impressive collection of expensive assets, they have a less impressive collection of credit card debts; a total of RM 60,000.

A few months ago, David tried applying for a housing loan to purchase another house to add to his list of assets. The application was unfortunately rejected due to a poor credit rating resulting from late bill payments.

He decided to come to AKPK to get some advice on resolving his financial position. Firstly, the counselor advised him to stop using his credit cards. He was also advised to practice discipline when using his credit cards and to live within his means. He was reminded that the more he uses his credit cards, the more debt he takes on.

David also shared that he never checked through his five credit card statements, he simply paid the minimum 5% amount required by the banks and moved on assuming everything was in order. He was advised against this practice because this will lead to him not knowing how much his debts actually are.

He figured that he could pay off half of the outstanding right away and by doing this, he could eliminate about half of his credit card debt. He was given a budget he could work with to settle his credit card debts within a year due to his high income.

In addition to this, he also realized that his expensive “assets” would not be able to help him through his financial position and promised to make changes to his lifestyle to avoid getting into more debt. David was thankful for the guidance given by AKPK’s counselors and commented that if he had been equipped with knowledge on managing his personal finances earlier, he would not have been in debt now.

Source of this story: http://www.akpk.org.my/learning/success-stories/id/1005/story-42

A credit card is a great financial tool. However, it controls and destroys you when you are unable to manage it properly. Be smart and avoid these 10 things:  

1.      Incurring debt: Yes, a credit card gives you credit.  It is only temporary and you have to pay the outstanding amount when the statement arrives.  When you do not pay or delay payment, hefty interest will be added. The amount snowballs with compound interest the longer you postpone your payment.

2.      Paying the minimum: Always pay promptly and fully to avoid interest charges. While you are paying the minimum at the same time you are also adding more charges to your credit card account and the outstanding amount will become a much bigger sum. Over time paying the minimum amount may be beyond your financial means.

  

3.      Using it when you are already broke: When the time is bad, more people use credit cards to charge their daily expenses. It is bad because you are already running short of cash and it is unlikely for you to pay what you owed. You will end up as a bankrupt.

4.      Ignoring the monthly statements: Look closely at the monthly statement to spot any fraudulent charges, do not just pay without matching all charges with your charge slips.

5.      Getting cash advances: It is another no-no because it attracts a cash advance fee and also interest on the amount advanced.   

6.      Paying for an annual fee: Get a card that is free for life. It is foolish to pay for the use of credit cards.

7.      Paying late: Pay promptly to avoid interest charges. Make it a habit to pay when you receive the monthly statement.

8.      Spending almost reaching the credit limit: As a general rule, you do not use more than 30% of available credit. It affects your credit score adversely. It is also likely that too large an amount can be out of your control.  

9.       Spending just to earn rewards points: It is another silly thing to do by charging more and spend unnecessarily just to earn reward points. Use your cards only when you need to.

10.  Spending more than you can afford: Avoid impulse spending to break your budget. Live within your means is a golden financial rule to stay away from debt and misery. 

Are you making these credit card mistakes? 

How I Manage Three Credit Cards Without Incurring Debt

Credit cards are different from charge cards like American Express and Diners. For charge cards, you have to pay in full when it is due. For credit cards as the name implies you can get credit by paying a minimum amount of 5% or RM50, whichever is higher, and carry forward the balance to the following month with a finance charge of 18% per annum. However, the danger is that you are incurring interest for the outstanding amount.  When you are not careful, the outstanding amount snowballs with compound interest over time to an amount beyond your means. You may end up as a bankrupt. A credit card is a double-edged sword.   It is useful and yet financially destructive.

I have three cards: CIMB PETRONAS MasterCard, Hong Leong Bank Platinum Visa card, and Hong Leong Bank GSC Visa card. I allocate different usage for each card so that all three cards stay active.

This is how I use the three cards to my advantage:

CIMB PETRONAS MasterCard: It is essentially a cash rebate card. When I pump petrol I charge it to this card. At the end of the month, I am given rebates on the amount spent. To maximize the usage of the card and pay less I charge all my utility bills such as telephone and electricity plus monthly insurance premium to this card. When you pay by cash you pay the full amount.

Hong Leong Bank Platinum Visa card: This is my grocery card. I use it in conjunction with The Store Card. I shop at The Store as it is situated next to my place of work. I charge all my grocery expenses to this card and collect reward points. At the same time, I present The Store Card, which is a membership card also to get points at one point for each Ringgit spent. Over time I redeem points accumulated to exchange for useful items. As for The Store Card, I can redeem for goods or their gift vouchers.         

Hong Leong Bank GSC Visa Card: This is my entertainment or movie card. I get discounts for the purchase of movie tickets. Right now there is a promotion going on for a year; I get a free ticket when I buy tickets on a Thursday to watch a movie on Thursday, Friday, or Saturday. You can take further advantage by joining   Golden Screen Cinemas (GSC) as a member so that during your birthday month you will get two movie tickets free. I also use this card for other purchases and big-ticket items and pay by their zero-interest instalment plan for 12 to 24 months   

Conclusion:

You will see that all the charges are my normal expenses every month. I don’t charge unnecessarily and I settle promptly and fully every month without incurring extra charges. I use my card wisely to reduce my expenses or maximize my spending and not to incur credit and build up debt.  

How many credit cards do you have and how do you manage your cards? Share with us.

How to Maximize Grocery Spending with Your Credit Card

I have a Hong Leong Bank Platinum Visa Card and I treat it as my grocery credit card. I also have The Store Card. It is a membership card. I use both cards to maximize my grocery spending.

This is my tactics:

·         Location: I choose The Store for grocery shopping because it is next to my place of work. I don’t have to spend time and petrol driving to another place to do shopping. The Store is owned by The Store (Malaysia) Sdn. Bhd, a public listed company in Malaysia.

·         Purchases: Each time I shop for grocery I charge it to my Platinum card and I also present The Store Card to collect points at RM1/= per point.

·         Credit card reward points: For each ringgit, I charge to my credit card, I get one point. Over time I can redeem my accumulated points for useful items.

·         The store Card: As a member, I am covered with RM10,000 personal accident insurance. I also enjoy special discounts for many items from time to time. Their point system works the same as the credit card.  You can earn and keep the points and exchange them for grocery items later. However, I opt for their gift vouchers like the one shown here. I prefer to use the vouchers to buy apparel. The card carries an annual fee of RM12/=. My annual spending at the store is much more than enough to offset the fee.

You can also apply for The Store /Pacific Hong Leong Bank MasterCard. You will earn up to 6% cashback when you spend at The Store/Pacific and 0.5% cashback on other retail transactions. You will receive your cash rebate in the form of The Store and Pacific's Gift Vouchers via the Credit Card statement every quarterly.

   I use my credit card to shop for what I need only. I pay the amount as stated in the monthly statement fully and promptly. In this way, I don’t incur extra credit charge charges. If I need to spend on a big-ticket item I    arrange for an interest-free installment plan for 12 or 24 months with the card issuer.    

   How do you maximize or reduce your grocery spending? 

Credit Cards and Young People

According to a report from Credit Counseling and Debt Management Agency of Bank Negara Malaysia or The Central Bank of Malaysia, among the cardholders below the age of 30, 50% of them are unable to settle their credit card debt and they have to declare bankruptcy. In the survey, among the delinquent cardholders, 22% cannot properly manage their personal finance and another 27% cannot control the use of their credit cards.


What can young people, especially fresh graduates, do to manage their personal finance? Here are some useful tips


• Pay in cash: You will not get into debt when you pay in cash for all your purchases. Your spending is limited by your financial resources.

• Use a prepaid card or debit card issued by Visa or MasterCard: For a start young people should use a prepaid card (it is preloaded with a sum of money and you use it as a credit card until the amount stored in the card is exhausted). You can also use a debit card and it is linked to your bank account. Like a credit card, you can charge your purchases to your card up to the maximum amount of your available fund in your bank account. You will gain credit card experience this way.

• Credit card: When you are using a credit card for the first time, remember to treat it like cash. For each Ringgit, you charge to the card back it up with cash for the same amount to meet payment at the end of the month. Do not opt for the minimum payment. You will not only incur interest but at the same time, it is the route leading to unmanageable debt and eventually bankruptcy. Use the card for convenience only. Don’t buy in credit to attract interest and debt.

• Impulsive spending: Do not show off your credit card by entertaining your friends lavishly with it. Do not buy what you want but use the card to spend according to your monthly budget. In this way, you stay out of debt. Getting into debt is easy but getting out of it is very difficult. Spend only your own money but not the bank’s money. Nothing is free in this world.


You can keep your credit cards but you have to spend within your monthly earnings and treat your cards like cash in your pocket or in your bank accounts. Settle the credit card bills promptly and fully to build your creditworthiness.

Source: Credit Cards and Young People

How I earn credit card rewards responsibly

The Rewards Card

The topic of maximizing credit-card rewards seems to be a popular one lately, especially in the world of personal finance blogging.

Many of us use our credit cards to pay our bills and monthly expenses. We earn cashback and rake in the rewards. Some of us have even mastered the envious ability to churn credit-card rewards to pay for awesome vacations.

Because personal finance readers are so financially savvy, we usually take for granted that, for many people, this is a dangerous habit. After all, the average US household credit card debt

is upwards of $15,000.

If you do it right, earning credit card rewards is a great money hack. Last year, for example, I earned $450 in cash-back. But you should have control of your finances before trying any kind of hack like this.

Let’s say you have control of your financial situation and you’re ready to play this credit-card-rewards game. How do you play properly? And what precautions should you take?

Here’s what’s worked for me.

Budget meticulously

I use a zero-sum budget, which is ideal when you use a credit card for monthly expenses.

Spending less than you earn is important anyway, but I think it’s crucial when you’re credit card churning. When I decided to start using a credit card

, I made sure to calculate my budget meticulously.

I double- and triple-checked that the grand total of my expenses was less than my monthly income. I also considered my quarterly and bi-annual expenses.

Once you’ve established a thorough budget, monitor it. And whatever medium you use to budget, include your credit card account in it. I use Mint, and my card is linked to my account.

I make sure to spend within the limits of my budget so that I don’t have to worry about overspending on the card. But, just to be safe, I also monitor my budget. I subtract my credit card debt from the amount in my checking account.

I make sure this amount is enough to cover the rest of my monthly expenses.

When I first started playing with credit cards, I didn’t budget properly. I didn’t use Mint, and I’d check my checking and credit accounts separately. Basically, I would just do the math in my head, which is a bad budgeting habit, according to the fuzzy-trace theory. So, of course, I would spend more than I meant to spend. I’d bust my budget.

It’s pretty simple. You should monitor your budget the same way you would with a debit card, to make sure you don’t overdraft. But you have to be even more careful with credit cards because there’s no overdraft protection. And worse, if you don’t make your payment, you’re officially in debt.

Pay your card regularly

In order to keep up with my spending, I pay off my credit card every two weeks. This is also a good way to avoid incurring a late fee or interest, which would cancel out the rewards.

I used to pay off my card on the due date, and that’s definitely an option if you don’t want to worry about making a payment every other week. Paying it more frequently is just an added precaution. Plus, it helps me keep my budget organized.

Don’t spend to your limit

This is pretty self-explanatory. Obviously, you shouldn’t budget according to your credit card limit. If you’re tempted to do this, then you probably shouldn’t be playing the credit-card-rewards game in the first place.

But, for the sake of being thorough, I’ll put it out there: Don’t spend based on your credit card limit. And avoid raising your limit, too.

If you’re planning for a big expense, you might consider making an exception so that you can earn rewards for said expense. But if you think you might equate a raised limit with more spending, just don’t do it.

Pick a good card

When you’re tempted by an enticing offer, do your research. Read the terms and conditions. Read reviews. Here are a few things to consider when choosing a card:

• Is there an annual fee?
• What’s the cash-back incentive? How does it compare with other programs?
• If you’re planning to use the card internationally, are there foreign transaction fees?
• What’s the interest rate?
• Is there a minimum finance charge?

Ideally, the last two shouldn’t matter, but it’s still good to know.

Have an emergency fund first

Because there is a risk of using a credit card, it’s really important to make sure you have an emergency fund first.

Common sense, but worth addressing.

It’s bad enough to over-budget and not have an emergency fund — you have overdraft fees and returned check fees. But when you over budget with a credit card, there’s the added nightmare of interest and late fees.

You shouldn’t play with credit card rewards if…

• You have a shopping problem. A credit card is way too tempting for shopaholics.
• You’re in consumer debt. I wasn’t in massive debt, but I used to have $1,000 worth of credit-card debt. I paid that off before I even started thinking about using my card for expenses.
• You’re living paycheck to paycheck.
• You have bad credit. According to Girls Just Wanna have Funds you should have excellent credit if you’re going to churn cards. “A credit score of 720 or higher on a scale of 850 is considered excellent, and you should have at least a few years of good credit history.”
• You’re considering applying for a mortgage or loan within the next year. “Applying for a credit card will lower your score modestly — about 5 points for each application,” Girls writes. “But if you are about to get a mortgage or other big loan and are borderline on being qualified, they may frown upon opening too many card accounts just prior to applying for the loan.”
• You’re incredibly disorganized and forgetful: There’s the risk of paying your card late and incurring interest. If you’re so forgetful that even reminders sometimes don’t help, I’d probably stay away from credit-card churning.

Rewards are great, but, again, they’re more of a money hack. And having control of your finances is way more important than any hack.

I should also mention that, because lots of people do have trouble managing their finances, many financial counselors advise against playing the credit-card game. Yes, there’s definitely a disconnect because the topic of credit card rewards is hugely popular in the personal finance blogosphere.

With organization and self-control, I think it’s possible to take advantage of credit-card rewards without getting into trouble. If you have a spending problem, however, it’s definitely a bad idea. In that case, you should wait until you get your finances in order and have more control over your situation.

And, anyway, this is just what’s worked for me.

If you earn rewards, what’s your system? And what do you do to prevent any small credit-card disasters?