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How does credit card interest work in Malaysia? Credit card interest is charged on any outstanding balance not paid in full by the due date in Malaysia.
Calculating the daily interest rate involves taking the annual interest rate (APR) and dividing it by 365 days in a calendar year.
Letting interest compound can quickly lead to unmanageable debt, so it’s wise to pay off balances as quickly as possible.
What is Credit Card Interest in Malaysia?
Essentially, credit card interest is the cost you pay for borrowing money when you don’t settle your credit card bill in full each month.
It is charged as an Annual Percentage Rate (APR) on the outstanding balance. The APR is the yearly interest applied to your debt, but it is calculated on a daily basis.
You can calculate the daily interest rate by dividing the APR by 365 days.
For example, if your credit card APR is 15% and your outstanding balance is RM1,000, the daily interest rate would be 0.041% (15% / 365).
Over 30 days, the total interest charged would amount to RM12.30 (RM1,000 x 0.041% x 30).
How Does Credit Card Interest Work in Malaysia?
In Malaysia, you can calculate credit card interest using a compounding method. Interest is charged daily on the outstanding balance, including any unpaid interest from previous days.
This escalates the total amount you owe quickly. Here’s how it works:
You start with the principal amount or outstanding balance on day 1.
Interest is calculated at the end of the day using the daily rate.
The next day, interest accrues on the new outstanding balance, which now includes the previous day’s interest.
This compounding cycle continues until you pay off the full amount.
What are Tiered Interest Rates in Malaysia?
To encourage discipline among borrowers, Bank Negara Malaysia introduced a tiered interest rate system in 2011.
The rates vary from 15% to 18% per annum, based on your repayment track record over the past 12 months:
Tier 1 (15% APR): If you pay on time every month
Tier 2 (17% APR): If you miss payments for three to nine months
Tier 3 (18% APR): If you miss payments for over nine months
However, consistently paying on time can help you enjoy the lowest 15% interest rate tier.
How to Lower Credit Card Interest in Malaysia
With such high interest rates, it’s wise to pay off outstanding credit card balances as quickly as possible. If you have a fixed deposit, consider withdrawing it to settle the balance.
Or, if your debt has remained unpaid for more than six months, consider using a balance transfer or obtaining a personal loan to halt the accrual of high interest.
By understanding how credit card interest works and applying good financial habits, you can avoid falling victim to punishing interest charges.
Why Was Your Bank Loan Application Rejected in Malaysia?
Applying for a bank loan in Malaysia can be challenging, and several factors might lead to rejection:
1. Credit Issues
CTOS score below 550: Banks consider this a high-risk indicator.
Late payments: More than two months overdue within the last six months.
Special Attention Account (SAA): Flagged accounts.
Trade references: Exceeding RM1,000.
Legal issues: Including bankruptcy.
2. Income Factors
Recent employment: Less than six months at your current job.
Income in cash: Unverifiable income.
No EPF contributions: Employment without EPF contributions.
Contract or freelance work: Considered unstable income.
3. High Debt-to-Service Ratio (DSR)
DSR over 70%: Monthly instalments exceeding 70% of net income make approval unlikely.
In situations like these, bankers cannot assist clients in securing a loan. Applying to these circumstances would not only waste time but could also worsen your financial record.
If rejected, you must wait six months before reapplying to the same bank, and each application can lower your CTOS score by 30 to 50 points.
Moreover, a CTOS score below 550 leads to immediate rejection by some banks.
Citywide Advisory’ Loan and Consultancy Services
Citywide Advisory is a trusted bank loan and debt consolidation agency in Malaysia, offering an array of financial solutions, including:
Personal loan services
SME loan services
Mortgage loan services (to purchase a new home, refinancing and cashback purposes)
Collateral loan services
We also provide tailored loan advice customised to your individual circumstances, considering a variety of factors like:
Required loan amount.
Urgency of the need.
Property ownership duration.
Income level.
CTOS score, including credit score and history.
Personalised Loan Consultancy Services in Malaysia
Citywide Advisory is the BEST loan advisory service in Malaysia.
Citywide Advisory also offers personalized loan consultancy services, helping clients understand and improve their rejected loan applications for refinancing housing loans and more.
We customise our loan recommendations based on an individual’s needs, considering factors like:
The specific loan amount you require.
The urgency with which the loan amount is needed.
Whether you or your parents own a property that has been held for over ten years.
Your income level.
Your CTOS score (such as your credit score and credit history).
Our goal is simple: to help you find the right loan solution, paving the way to financial stability and debt freedom.
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