How a Credit Card Transaction is Processed

It takes only a few seconds to scan your card and the transaction is completed and you are on your way home with a new pair of sneakers. However, in that few seconds, information passes swiftly from one party to another to get approval for your transaction. Here is how a credit card transaction is processed:


1. You produce your card to charge the purchase. The merchant scans your card.

2. A request is sent to the merchant’s bank for the transaction.

3. The merchant‘s bank sends another request to the issuing bank of your card to obtain authorization of the transaction.

4. An authorization code is sent to the merchant’s bank when the transaction is in order.

5. The merchant is notified and a slip is printed for the cardholder to sign and another slip is printed for the cardholder to keep. The transaction is completed successfully.

6. The merchant keeps the transaction and other transactions for the whole day and does a batch at the end of the day and transmits it to his bank for settlement

7. The batch is sent through the card network such as Visa or MasterCard to request payment from the issuing bank.

8. The issuing bank deducts a fee which is shared with the card network and transfers the balance of the amount charged through the network to the merchant’s bank.

9. The issuing bank debits the cardholder’s account for the full amount charged and obtains payment from the cardholder in due course.

10. The merchant receives the amount from his bank less a discount rate.


A simple transaction but a complicated way for the merchant to get it approved and finally receive the fund fewer charges (around 2%).

3 Ways to manage your money to avoid bankruptcy

Bankruptcy

According to figures released by the Malaysian government, from 2005 until June this year the following categories were the top cases in the number of people declared bankruptcy:


Unable to settle car loan 15176 cases (23.69%)

Unable to settle commercial loan 6949 cases (10.85%)

As guarantor 6244 cases (9.75%)

Unable to settle personal loan 6129 cases (9.57%)

Unable to settle credit card debts 3767 cases (5.88%)

Owning to income tax 660 cases (1.03%)

Housing loan default 214 cases (0.33%)

Educational loan 138 cases (0.22%)


Out of the 8 categories, 6 categories were relating to people who were unable to manage their personal finance. How do you look after your own money to avoid being declared bankrupt?


1. Live within your means: Before you decide to obtain a car loan or a personal loan you must factor in the amount payable each month within your monthly budget. When you work out the sum and you find that your outflow (household expenses, car loan or personal loan repayment, and all other commitments) is more than your inflow (your earnings) you are not in a position to raise the loan. Avoid the temptation and forget about getting a new car or getting a personal loan to beautify your house.

2. Credit card: Credit card is not a source for getting credit. It is only a convenient way to make payments. You still have to earmark and set aside a sum to meet the payment that you have charged to your credit cards. Again, the amount that you are about to charge has to be included in your monthly budget. If it is out of your monthly budget don’t use the card and restrain yourself from getting materialistic. Another point is that it is wise to settle the amount fully and promptly when you receive the monthly statement from the bank. If you don’t, you will incur late charges and finance charges and the amount will snowball. Bankruptcy is the outcome as confirmed by the number of cases stated above.

3. Self-discipline: Don’t keep up with the Joneses. Do not attach yourself to material things. Enjoy what you have and be happy. Keep your reputation clean because people remember you more as bankrupt than an ordinary citizen.


A debt-free life is a carefree life. You go to sleep soundly every night knowing fully well that nobody is going after you for money.

6 Ways to Use Your Credit Cards and save

Credit cards are a useful financial tool to employ for maximum savings. This is how you can do it:

1. Keep only those cards that are free for life. For each free card, you keep you can save between RM200 and RM300 on annual fees.

2. Use one of the cards for the payments of monthly insurance premiums and utility bills such as electricity and telephone. It is very inconvenient to pay so many bills all by yourself. For the monthly amount charged to the card, you can collect valuable points. You can then redeem the point for useful household appliances like cooker, Thermos flask, oven, and vouchers.

3. Use CIMB Petronas Card (gas credit card) to pump petrol and receive the 2% cash discount and the card is free for life.

4. Use a cashback credit card for all the purchase of grocery items and other goods

5. Use one of your cards to buy big-ticket items by installments with zero percent interest. You spread the installments up to 36 months. Your monthly cash flow will not be affected severely. You don’t incur interest and on top of that, you collect valuable points to redeem useful items.

6. Pay your credit card bills promptly and fully. Otherwise, the interest charges will be more than your savings.

Take advantage of offers given by credit card issuers to maximize savings. Most important of all, settle the amount fully before the due date when the statement arrives.

7 Tips to Use Your Credit Cards

There is a saying,” Credit card is for convenience and not for credit."
So, take the following precautionary measures:


1. Every time you use your card make sure that you have sufficient funds to meet the payment at the end of the month.

2. Do not exceed your credit limit.

3. When you notice any unauthorized transactions in your statement, inform the bank promptly.

4. Pay your monthly statement before the due date.

5. When you make major purchases by monthly installments ensure that the amount is within your monthly budget.

6. When you are unable to make payment in full you must settle the monthly interest fully and also nothing less than the minimum amount.

7. Notify the bank when you change your address. Ask for a copy of the monthly statement when you don't receive it. Otherwise, you will end up paying interest for late payment.


When you take proactive steps to use your cards you also look after your creditworthiness.

10 Tips to Protect Your New Card

Congratulations! Your bank has just approved your application for a credit card. Before you start charging the card, take note of the following points to protect your card from fraudulent uses:

1. Sign your name on the reverse of the card as soon as you receive your new card.

2. Do not disclose your 16 digits number and the 3 digits security number to anyone.

3. Keep copies of your charge slips and use them to check the monthly statement. Look for charges which are not transacted by you.

4. Whenever you go overseas inform the bank and provide a contact number.

5. Arrange with your bank to increase the credit limit for your trips abroad.

6. Inform the bank in the first instance when your card is lost.

7. Whenever possible keep your card in sight when you use it to avoid fraudulent charges. When the card is returned to you check and make sure that it is your card.

8. Do online transactions on secured sites with an ‘S’ – https:// not just HTTP://

9. Never leave your card unattended or leave it in your car. Always keep it with you.

10. Protect your Personal Identification Number (PIN) to access an Automatic Teller Machine (ATM). Memorize it if possible or keep the number separately.

Be vigilant and always be on the alert when you use your card. Make it a habit to check your wallet every now and then to make sure that the card is always with you

4 Types of Plastic Cards to Make Purchases

There are four kinds of card, namely, credit card, charge card, debit card, and prepaid card.


Credit Card: The credit card issuer, upon approval of your application, will issue a card to you with a credit limit. You can use it worldwide. When you receive the monthly statement you pay the full amount or the minimum amount. Visa and MasterCard are such cards.

Charge Card: American Express and Diners Club are the issuers of charge cards. Upon receipt of their monthly statement, you have to pay the full amount. However, there is no credit limit. It is only limited by your spending power.

Debit Card: The card is linked to your savings or current account. Every time you use the card the amount is deducted from your account. You use your debit card just the way you use your credit or charge card.

Prepaid card: The other card is the prepaid card. You load the card with a certain amount and then you can use it like a credit or debit card. You use the prepaid card to limit or control your monthly spending.


Choose the right card to suit your needs