Credit Card

CHAPTER 3
CREDIT CARD

- Pn. Sazazila Abdullah-

• What do you understand about the impact of
minimum payment and late payment on credit card
use?

• The credit cardholder will receive a financial statement for
the credit card monthly . In the statement , there are
details such as credit limit , statement date , latest
amount , minimum payment amount , type of charges and
so on.

• The cardholder should pay the statement balance
immediately so that no financial charges are incurred .
But bank provide flexibility by allowing users to pay in a
given period , known as the interest free period . Usually
this period is 20 days from the statement date .

• To enjoy this privilege every month , the cardholder must
pay the total balance of credit card statement or make a
minimum payment in the interest free period . The
minimum payment is usually 5% of the total balance of
the credit card statement or a minimum of RM 50 .

• If there is still a balance of the latest amount upon expiry
of the interest free period , a finance charge ( or interest )
will be imposed on the balance based on daily rate . Most
bank charge an annual interest rate of between 15% and
18% .

• In addition , if no payment is made within the interest free
period , then the minimum late payment charge of RM 10
or 1% of total ountstanding balance of the statement date
will be charged .

Example 1

• Min Hui used credit card to make a payment of RM 1500
for a watch . The amount is also the current amount in
June statement . She didn’t make any repayment for
June . Bank A charged a finance charge of 18% per
annum on the outstanding balance for 35 days and late
payment charge of 1% of the outstanding balance or
minimum RM 10 . Calculate the finance charge and late
payment charge that Min Hui had to pay . Assume that
Min Hui did not use credit card after purchasing the watch.

Solution:

• Outstanding balance = RM 1 500

Finance ch arg e  1500  18  35
100 365

 25.89

Late payment ch arg e  1  (1500  25.89)
100

 15.26

Example 2

• Eric bought a set of furniture with a cost of RM 2000
using credit card in April . He only made a minimum
payment of RM100 after he received the April statement .
Bank B charge a finance charge of 1.5% per month on
his transaction for 14 days and on the outstanding
balance for 18 days . Late payment charge imposed is
minimum RM10 or 1% of the outstanding balance .
Calculate the current amount in May statement . Assume
that Eric did not use credit card before and after
purchasing the furniture.

Solution:
• Outstanding balance = RM 2000 - 100
• = 1900

Finance ch arg e  2000  1.5  14  1900  1.5  18
100 30 100 30

 14  17.10

 31.10

Late payment ch arg e  0

• Current amount in May statement
• = 1900+31.10 + 0
• = 1931.10