How bank generate income from your credit card – A must know for Investor

Knowing is power, negligence bring disaster, if you know how bank works, crack the code,and you can get your money back from them.

Here is the list of what they do

1. Annual fee or supplementary card  fee – banks often waive this, since they can get at most RM 150 from you a year. It is a good marketing when they sell their credit card to you.

2. Interest or late payment charges – One of the key of bank’s income, the good reason why your credit limit is normally 3 to 6 times of you salary. Don’t you feel suspicious why they offer more than what you earn? It is always because, if you can’t pay this month, you can pay next month with interest. Usually it will be something like 2% of the balance or RM 10 whichever is higher.


3. Facilities charges – company who provide credit card as payment method is liable to 2% to 5% from total collection. Which mean for every RM 100 you spend, bank will get min RM 2 from it.  This does not include yearly fee chargeable to the respective company.

4. Balance cash out option – this is new, say your credit limit is RM 7500, you can withdraw 80% (RM 6000) just like ATM card. Beware, the interest is… 0.8% daily interest, equivalent to 29.2% per annum plus extra 5% interest every month. Suddenly feels like wanna be a bank owner right?

I’ll give you a hint, Bank encourage us to spend more, stand a chance to win attractive prize because of business reason – If you spend more, you probably cannot afford to pay back lump sum, thus have to bear item #2 and the more you spend, bank can get a lot from item #3

So, how do you use your credit card as investment tool, get a cash rebate from your credit card (take it as extra discount),  fully utilize EZpay, and still stand a chance to win even small cash prize?

See also: The Real Cost of Credit Cards Annual Rate – there is more than meets the eyes.


This is a contributed article by Zhafri

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