Of Credit Cards and Online Spending

Credit cards are an important financial tool nowadays, it’s hard to find reasons not to own one. Sure, we’ve heard of all the gloom and doom tales of getting buried in debt due to overuse of plastic, but the keyword here is “overuse”. Just like any other tool, the credit card can be used properly or improperly. It’s really not the fault of the tool if it caused damage, it’s more likely to be the fault of the user.

Credit cards are especially useful in these times of e-commerce. Imagine, a global marketplace where everything from books to viagra can be purchased by a click of a button. Credit cards are a definite must have tool in this age of internet shopping.

First of all, you must have access to this tool. What if you can’t? What could be the reasons? Here’s some probable reasons why you cannot apply for a credit card or personal loans:

  • Not meeting minimum salary requirements.
  • Poor credit history (fresh Malaysian graduates: Do you have any outstanding PTPTN loans unpaid?)

If that is the case, there is still hope. You can apply for debit cards. Some banks already integrate debit card facilities into their ATM cards; for example BSN Matrix, or you can go with Public Bank’s Visa Electron. These debit cards give you the exact same online shopping priviledges without the pesky requirements to get a credit card, but you need to make sure you have sufficient balance in your account before making purchases.

However, the advantage of using credit cards instead of debit cards is that you have a leeway to better manage your finances. To do this, you need to understand how credit cards work. A thorough explanation can be read here. However, I’m just going to focus on the two things that will matter most to card holders; the transaction recording period and the payment due date.

By planning your credit card usage properly, you can in fact have a lead time of about 14 to 60 interest-free days to clear your credit purchases. You should take note of your transaction recording period. Usually this is one day after your payment due date and lasts for 21 to 30 days. You should take note of your cards’ transaction recording period, and make purchases on the day(s) beyond this period to avoid unnecessary interest charges. If possible, clear all outstanding balance. Like I said earlier, credit cards are a financial tool, not a license to spend needlessly.

Back to the topic of credit cards and online shopping. I will usually use debit cards for online purchases. The reason for this is that I tend to be a little paranoid when it comes to submitting credit card numbers online. I know, I know, this is really unfounded, especially with more than 128-bit SSL available on most e-commerce sites today. Which is why I’m really happy when Southern Bank offered me a virtual MasterCard that can only be used for online transactions. Another bonus is that the existing Southern Bank gold Visa and MasterCard I already have have a security feature which disable them to be used for online transactions. The best part is that I can set a limit for the amount that can be spent using the virtual MasterCard.

I hope this writeup can help you plan your credit card usage better, especially for online transactions. If you have tips of your own, or know of some excellent credit card providers (especially Malaysian ones), feel free to comment. I’m looking forward to it!