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Monday, September 26, 2011

Credit Cards - App iPhone & Android, Easy Cash and Bankruptcy



APP to CALCULATE CREDIT CARD INTEREST for iPhone, iPad, iPod Touch and Android Smart Phones and  Tablets.

A member at LYN forum posted his app to calculate interest charges and duration to settle payment in full the outstanding balance for credit card. Pretty nice app for those with Apple iPod Touch, iPhone, iPad and Android gadgets. The app can be downloaded via iTunes App Store for iPhone, by searching for "Credit Card Calc" and also in Android Market by searching for "Credit Card Calculator".

Here's a short review of the app (Ver 1.0.0) which I downloaded into my Samsung Galaxy Tab. The app did not work well with my cheap Huawei Android Mifi Phone


After launching the app, you'll be greeted with the screen above and after few seconds you will see the screen below.



In the above screen, I have keyed in RM10,000 as the Credit Card Balance and by default the app will assume you will pay minimum 5% or RM50. Let's see how long it takes to pay off RM10,000 credit card balance with 17.5% interest rate.  


Wow! It will take 88 months (nice number) to settle in full RM10,000 outstanding balance if one were to pay the minimum RM50 or 5% monthly. The app also calculates the amount of interest paid too which is good info.

Now what if I want to know the amount to pay if I want to settle in 1 year time. See below screen and tap select Define Pay Off Period in the sub-menu.


After you selected the Period to pay off the outstanding amount, key in the number of months and by tapping Calculate you'll get the answer.


From the above screen, you'll note that the app stated 13 months instead of the 12 months I wanted. Not a major problem, just re-key in 11 months and you'll get your answer for 12 months repayment amount. Anyway, here's the table showing the payment.


This app is pretty good because from here you can go another step forward and compare what if you were to pay a different amount. The app will than work out the duration to settle in full the Outstanding Balance. For example, I want to know instead what if I were to pay RM1,500 monthly.


After I key in 1,500 in "What if I pay", and tap compare, I'll get below screen showing the information relating to both the earlier 12 months repayment and the the new "What If I Pay" RM1,500. This is nice as we can see two comparison at the same time. 


The app also can show the graph and table for each of the cases mentioned and can even combine the graphs. But the combined graph needs to be read in tandem with the tables because the final payment may be a small amount and therefore the nodes indicating payments may be overlapped in the last two months ( I am guessing here, or maybe it has something to do with the formula when plotting the graph and one month is missed out).  



In conclusion, the App is pretty good for giving the user some info on interest charges or the duration needed to settle in full if one were to pay a certain amount towards the Outstanding Balance in his credit card account. Best of all, the app is FREE :) And with time, I believe this App will get better once all the bugs are fixed.

Just remember, if you have outstanding balances, any new transactions will also be imposed interest and therefore better use another credit card that has no Outstanding Balance to avoid interest charges for nothing.


RHB BANK EASY CASH for CREDIT CARDS

RHB is now promoting their Easy Cash Plan where you can request for CASH up to 80% of your credit limit to be deposited into your RHB Current or Savings Account. For depositing into other banks, they will mail the cheque to the cardmember's bank choice. To read more, click below picture to enlarge. 



From the above advertisement, you'll note that the interest for the Easy Cash are 8% and 10% respectively for 12 months and 24 months. The interest is charged upfront and added to the Principal  Amount and the repayment then divided equally. As mentioned in my previous posts, upfront interest charges means effectively you'll end up paying to the banks a higher interest than that advertised.  It is just like personal loan where banks will advertise x% interest rate but failed to highlight to you the Effective Interest Rate since interest will be imposed upfront even before you start paying. RHB is transparent here where they have openly stated the effective interest rate.

For RM10,000 cash, with RHB Easy Cash  8% interest upfront, you need to pay back RM900 per month for the next 12 months. Now, going back to the Credit Card Calculator App where I also did an example with RM10,000 Outstanding Balance and 12 months repayment, you'll note that the amount is roughly  RM900 (see table posted earlier). So with upfront interest imposed onto your "loan amount", heck the 8% interest rate comes out almost same as the 17.5% interest rate for credit card where interest is on a reducing balance.

If you were to go with RHB Easy Cash 24 months plan, you'll be paying more than your credit card interest rate! If you were to sign up for 36 months; well, you must be damn desperate and most likely you'll end up deeper in the shit hole. Seriously, I think you might even pay less interest with cash withdrawal with your credit card where the rate is 18% on reducing balance (i.e. you pay more earlier, less interest is imposed since the outstanding amount is also reduced) than opt for RHB Easy Cash 24 months or 36 months where the Effective Interest Rates are 18.16% and 21.20% respectively. Those taking Personal Loans from the banks please take note of this. Now, I am not asking you to go do cash withdrawal with your credit cards, there is also an upfront fee with credit card cash withdrawal to be considered. Either way, you are paying through your nose. Please go read my article Credit Cards Are Cash Cow For Banks. Are You Working For The Banks? before you go do any cash withdrawal with your credit card.

What I wanted to point out in this post is that for those of you wanting to take RHB Easy Cash or Personal Loans from the banks, please do not be fooled by the Interest Rate Advertised, go find out what is the Effective Interest Rate before you go sign up for one. 

Now, with the RHB Easy Cash, your credit card statement will still show you only need to make 5% minimum payment. And if you only pay 5% minimum or you fail to make full payment towards the Easy Cash plan installment, you will be imposed 18% interest again; thus, you are imposed interest on top of the upfront interest that has already been imposed with the Easy Cash. Talking about fast way into the shit hole, this is one of them. 

What is really disappointing is that RHB Bank major shareholder is EPF which is suppose to safeguard our interest and ensure that we have adequate funds in our retirement years, But here, with RHB Easy Cash, EPF's bank is doing the opposite and making money indirectly by enticing people to spend beyond their means by giving them cash. If RHB were to offer 0% Balance Transfer, then I will say that EPF assisting people in debt and truly helping people ( and also benefiting those who settle their credit card outstanding balances monthly ).

Having said that, to be fair, RHB do have 9 months 0% interest installment plans for hospital and education bills which is good. Click here for more info.


LIVING BEYOND OUR MEANS CAN LEAD TO BANKRUPTCY

I also want to highlight an article in The Star published on 22nd September 2011 titled Shocking Reasons Why Malaysians Living Beyond Their Means - click here to read it.

In the above mentioned article, it was quoted:

On average, 41 are declared bankrupt every day, mostly due to credit card debts, while every weekend, about five million throng the 300-odd shopping complexes in the country.

In my article titled RM103 Billion Credit and Balance Transfer  I posted below quote:

MAAKL Mutual Bhd licensed financial planner Rajen Devadason points out that of the over 10 million credit cards issued to Malaysians, only 30% pay their balance in full every month. He says that studies reveal that a consumer with a credit card is likely to spend 17% more than someone using cash.


Now what does the above means?

1. Shopping is the main reason why most Malaysians are in debt. Not surprising considering that many people are willing to buy smart phones and gadgets that cost more than half their monthly salary and people into branded goods.

2. Everytime we go to the shopping mall, those of us with credit cards will tend to spend unnecessary. So easy, just swipe our cards and then worry later. If no money, either go with installment plans or do balance transfer. I tell you, both the installment plans and  balance transfer plans are traps to make us spend more than we can afford. BNM should ban all Installment Plans and  Balance Transfer plans immediately.

3. According to The Star report, there are 41 people going bankrupt every day which works out to be 14,965 people every year. In my article titled Credit Card Minimum Income Raised to RM24K, I have mentioned that approximately 15% of the population of Malaysia holds a credit card. According to The Star, in 2010 there were 3,200,000 people in Malaysia with Principal credit cards. So assuming those 14,965 people a year going bankrupt has a credit card, it works out to be about 0.467% of card holders going bankrupt every year. Or put it this way, close to 1% or 1 in 100 people with credit card will go bankrupt every 2 years. This is serious. I think BNM should raise the credit card annual income requirement to RM36K/year and limit the credit limit to 2X monthly income for people earning up to RM5K/month immediately.

However, there is another report in The Star back in August 2010 titled Car Loan Takers Tops Bankruptcy List - click here to read it where it was said that 500 people go bankrupt every month due to car hire purchase loans. Well, those people who can qualify for a car loan would most probably hold a credit card too, because prior to March 2011, to be eligible for a credit card, one only needs to earn RM1,500/month. Then again to qualify for a credit card now also isn't that hard as one only needs to earn RM2,000/month gross income.

All of us will have some kind of loans in our lives - education, car or house. And while having  these commitments, we go get a credit card (and easily qualify for it since the banks don't "really" take into consideration that we are already up to our necks in debt) and some even issue us pre-approved credit card with our loans. Having a credit card (easy credit) when we're already trying to stay afloat with all the bank loans may be the tipping point that will decide if we will become poorer or richer.

It's like a soldier with the backing of the military might (person gets a car loan from the mighty banks) gets armed with a tank (car) to enable him safe passage (comfort in traffic jams with air-con) to the battle field (the 300 odd shopping malls in Malaysia) and with his newly assigned shining weapon made from Platinum (credit card) fully loaded with ammunition (credit limit). The soldier had only one primary mission to take down an easy target (that's to buy groceries) without alarming the enemies. But somehow the soldier lost his/her mind, he/she feels invincible and goes trigger happy (swiping and signing for branded goods). And when his/her ammunition is exhausted, and he/she is wounded badly, there's no rescue team. The military establishment (the banks that gave him/her the car loan and credit cards) turns a blind eye on his/her predicament. This wounded soldier becomes a liability (not repaying his/her debts promptly) and the General (Bank Management) orders that he/she be taken down with operation code name Eagle (legal actions). Fortunately, the wounded soldier manages to crawl to the Red Cross tent and is provided with temporary shelter from his enemies (by declaring bankruptcy) while he/she recuperates.


CONCLUSION

RHB Easy Cash is just an example, other banks also offer similar plans like AmBank and Hong Leong Bank and Maybank Ezy Cash. Citibank gives you blank cheques!  My advise to you is not to sign up for these plans or so called benefits/promotions. If you don't have money today, what makes you think you'll have money to repay the personal loans or cash advances in the following months. Even if you have no debts and can repay the loans, why do you want to pay exorbitant interest rates to the banks. Follow the old fashion way like what our grandparents did, save up and only buy the necessary stuff when we have the cash in hand.


OTHER RELATED POSTS

Click here to read Credit Cards Are Cash Cow For Banks. Are You Working For The Banks?

Click here to read Malaysia Credit Card Annual Income Requirement and Credit Limit.

Click here to read Credit Card Balance Transfer 2011

2 comments:

  1. nice conclusion . another great post to share.. do you mind add in facebook share button, I wish people can easily share it?

    ReplyDelete
  2. blurfiz, I am glad that you find my posts to be helpful.

    I don't really know much about facebook and because of the template of chose for this blog 2 years ago, the facebook button will not show up in all my posts even though I have check it. But in the right coloumn under Share It, there is something for facebook and I got no idea how it works. Maybe you can share it at your facebook and do me a favour to spread this blog with all :)

    ReplyDelete

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