Comprehensive Guide on Credit Card in Malaysia

Let’s be honest—credit cards have a bit of a reputation.

Some see them as a symbol of financial freedom, while others fear them as a trap that leads to endless debt.

So, which is it?

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The truth is, a credit card is just a financial tool.

It’s neither good nor bad—it all depends on how you use it.

If you understand how credit cards work in Malaysia, you can enjoy their benefits without falling into debt.

That’s exactly what we’ll cover in this guide.

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Table of Contents

What Exactly is a Credit Card?

At its core, a credit card is a short-term loan provided by a bank.

When you swipe your card, the bank pays on your behalf, and you owe them that amount.

It’s convenient for daily spending, especially when carrying large sums of cash isn’t ideal.

However, credit cards are not meant for long-term borrowing due to high interest rates.

If you need a long-term loan, a personal loan is a better option.

Difference between Credit Card and Debit Card

A lot of people confuse credit and debit cards, but they work very differently:

In essence, a credit card is about borrowing money to spend and repaying it later, with the potential for rewards and interest charges, while a debit card is about spending your own money directly from your bank account.

Choosing between them depends on your financial habits, spending needs, and whether you want to build a credit history or avoid debt.

Why Consider Getting a Credit Card in Malaysia? (The Benefits)

When used responsibly, credit cards can be a powerful financial tool, offering several key advantages:

1. Convenience & Security

Credit cards provide a hassle-free and safer way to make transactions without carrying large amounts of cash.

In Malaysia’s growing cashless economy, they are widely accepted for in-store purchases, online transactions, recurring bill payments, and even e-wallet top-ups.

Additionally, if your card is lost or stolen, you can instantly freeze or cancel it, preventing unauthorized use.

Some banks also offer real-time fraud alerts, ensuring extra security.

2. Build & Improve Your Credit Score

A credit card is one of the easiest ways to establish and maintain a strong credit history.

Your credit score plays a crucial role when applying for loans, mortgages, or even car financing.

By using a credit card and paying your bills on time, you demonstrate financial reliability, which increases your chances of securing better loan terms in the future.

Even if you have enough cash, responsible credit card usage can enhance your credit profile beyond cash transactions alone.

3. Earn Rewards, Cashback & Travel Perks

Many Malaysian credit cards offer generous cashback, reward points, or air miles, allowing you to save money or earn perks on everyday expenses. Some benefits include:

Cashback of up to 15% on groceries, petrol, dining, and bill payments.
Air miles accumulation for frequent travelers, redeemable for flights and upgrades.
Multiplying reward points that never expire and can be redeemed for shopping, travel, or vouchers.
Exclusive discounts at partner retailers, restaurants, and travel services.

By choosing a credit card that aligns with your spending habits, you can maximize savings and take advantage of these rewards effectively.

4. Interest-Free Installments (Easy Payment Plans – EPP)

For big-ticket purchases, many banks offer 0% interest installment plans, allowing you to spread payments over several months without extra charges.

This makes it easier to afford essential items like electronics, furniture, or medical bills while avoiding high-interest debt.

However, failing to make payments within the agreed timeframe can result in standard interest rates being applied, so disciplined repayment is crucial.

5. Emergency Financial Backup

A credit card can serve as a short-term financial safety net for unexpected situations, such as car repairs, medical emergencies, or urgent expenses.

While it’s not a substitute for an emergency fund, it can provide temporary financial relief when needed.

The key is to pay off the balance quickly to avoid accumulating high-interest debt.

6. Purchase Protection & Fraud Security

Credit cards often come with built-in purchase protection, including:

Fraud protection – Get real-time alerts for suspicious activity and dispute unauthorized transactions.
Extended warranties – Some cards offer added warranty coverage on purchases.
Chargeback rights – If you don’t receive goods or services as promised, you may be eligible for a refund through your bank.

How Does Credit Card Work Malaysia?

A credit card allows you to borrow money up to a set limit to make purchases, pay bills, or even withdraw cash.

Understanding how it works can help you use it wisely and avoid unnecessary fees.

Here’s a breakdown of how credit cards function in Malaysia:

1. Making Purchases

Credit cards can be used for both physical store transactions and online purchases.

For online payments, you’ll need to enter your card details and verify the transaction via OTP (one-time password) or other security measures.

Beyond shopping, credit cards also allow you to:

Pay for recurring bills (e.g., subscriptions, utilities).
Reload e-wallets (e.g., Touch ‘n Go eWallet, GrabPay).
Enroll in Easy Payment Plans (EPPs), which let you convert big purchases into installments at 0% or low interest.

Whether you use Visa or Mastercard, the payment process remains the same, as they are global networks facilitating transactions.

2. Credit Limit

Your credit limit is the maximum amount you can spend using your card. Banks determine this based on your monthly income and credit history.

Bank Negara Malaysia (BNM) regulations:

If you earn RM36,000 or less per year, your total credit limit across all cards cannot exceed twice your monthly income.
If you earn more than RM36,000 annually, banks set your credit limit at their discretion.

Exceeding Your Limit:

Going over your credit limit may result in an over-limit fee (typically RM25–RM50 per month). Responsible credit usage is key to maintaining financial health.

3. Billing Cycle & Statement

Each month, your bank will send you a credit card statement summarizing:

All transactions made during the billing period.
Total amount spent and any payments made.
Outstanding balance (amount owed).
Minimum payment due and due date.

Billing cycles typically last 28–31 days, depending on your bank. If you pay your full balance on time, you won’t be charged interest.

4. Repayments & Interest Charges

When it’s time to pay your bill, you have three options:

Pay in Full (Best Option)

Paying the full balance before the due date ensures you avoid interest charges.
Most cards offer a 20–30 day interest-free period, but this applies only if you settle your bill in full every month.

Pay Only the Minimum Amount (Not Recommended)

Banks require you to pay at least 5% of your outstanding balance or RM50 (whichever is higher).
Carrying a balance means you start accruing high interest (15%–18% per year) on the remaining amount.
This can snowball into credit card debt, which is a major cause of personal bankruptcies in Malaysia.

Miss Your Payment (Worst Case Scenario)

Late payment fee: 1% of outstanding balance (min RM10, max RM100).
Negative impact on your credit score, making it harder to get loans in the future.
Higher interest rate: BNM’s tiered system increases your rate to 18% per annum if you consistently pay late.

Fees and Interest Rates

Credit cards come with various costs that every cardholder should understand to avoid unnecessary expenses and manage finances effectively.

1. Interest Rates

Credit card interest rates in Malaysia typically range from 8% to 18% per annum, depending on repayment history.

Interest is charged daily on any outstanding balance not paid in full by the due date and compounds over time.

Bank Negara Malaysia (BNM) enforces a tiered interest rate system:

15% APR for those who make timely payments for 12 months.
17% APR for those missing payments for 3-9 months.
18% APR for those missing payments for over 9 months.

To avoid interest entirely, always pay your full balance on time. Using a credit card for long-term borrowing is costly due to high interest rates.

2. Annual Fees

Some credit cards have zero annual fees, while premium cards may charge hundreds or even over a thousand Ringgit annually.

Many banks waive annual fees based on promotions, card usage, or minimum spending requirements.

Always check if the card’s benefits outweigh the fees.

3. Late Payment Fee

If you miss the minimum payment by the due date, you’ll incur a late payment fee of 1% of the outstanding balance or RM10, whichever is higher, capped at RM100.

Late payments negatively impact your credit score.

4. Cash Advance Fee

Withdrawing cash from your credit card comes with steep charges:

Cash advance fee: Typically 5% of the withdrawal amount or a minimum of RM15-RM25.
Immediate interest: No grace period; interest starts accruing from the withdrawal date, often at 18-20% APR.

Due to high costs, cash advances should be used only as a last resort.

5. Foreign Transaction Fee

When spending overseas, banks usually charge a 1% foreign transaction fee.

Some merchants may offer Dynamic Currency Conversion (DCC), converting your purchase into Ringgit at checkout.

However, DCC often uses unfavorable exchange rates, making it more expensive than the standard foreign transaction fee.

It’s generally better to pay in the local currency.

6. Service Tax

A RM25 annual service tax applies to each active credit card, including both principal and supplementary cards.

Some banks offer rebates on this tax as part of their promotions.

What are Supplementary Cards?

A supplementary credit card is an additional card issued under a principal cardholder’s account, allowing a designated individual—such as a spouse, parent, or child—to access and use the credit limit of the primary card.

The principal cardholder retains full control over who receives a supplementary card and remains legally responsible for all charges made on it.

Benefits of Supplementary Cards

Simplified Expense Management – All spending from both the primary and supplementary cards is consolidated into a single statement, making it easier to track household expenses.
Faster Reward Accumulation – Since all transactions contribute to the same account, the principal cardholder can accumulate points, cashback, or air miles more quickly.
Financial Accessibility for Family Members – A supplementary card can provide financial flexibility to individuals who may not qualify for a credit card on their own, such as a non-working spouse or a child who needs access to funds in emergencies. Unlike the principal card, supplementary cards do not require the holder to meet minimum income criteria.
Convenience & Control – The principal cardholder can set spending limits for each supplementary card, ensuring better financial oversight.

Risks and Considerations

Higher Risk of Overspending – With multiple people sharing the same credit line, it can be easy to exceed budgeted expenses, leading to potential debt accumulation. Clear communication and financial discipline are essential.
Shared Credit Limit – Every transaction on a supplementary card reduces the available credit for the principal cardholder, which could impact their own spending needs.
Full Financial Responsibility on the Principal Cardholder – Any outstanding balance, late fees, or penalties incurred by supplementary cardholders fall under the sole responsibility of the primary cardholder.
Annual Service Tax – In Malaysia, a RM25 service tax applies to each active credit card, including every supplementary card issued.
Age Requirement – While supplementary cards have fewer eligibility restrictions, the holder must be at least 18 years old to qualify.

How to Choose the Right Credit Card for You

Not all credit cards are created equal. Before applying, it’s essential to evaluate your financial habits and priorities to find the card that best suits your needs.

Here are the key factors to consider:

1. Identify Your Main Goal

Your choice of credit card should align with how you plan to use it:

Cashback for everyday spending – If maximizing cashback on daily purchases is your priority, look for cards with high rebate rates. For example, the Standard Chartered Simply Cash Credit Card offers up to 15% cashback, while the Maybank 2 Gold Card provides up to 5% cashback on American Express transactions.
Travel perks and air miles – Frequent travelers can benefit from cards that offer reward points for foreign currency spending, complimentary airport lounge access, and travel insurance. The HSBC Travel One Credit Card provides 8x reward points for foreign spending and lounge access, while the CIMB Travel World Credit Card offers even more bonus points on airline and overseas purchases.
No annual fees – If you want to avoid ongoing costs, consider a card with zero annual fees. The Maybank 2 Gold Card is a great option. However, some cards waive annual fees based on spending requirements, so be sure to check if the conditions align with your spending habits.

2. Check the Minimum Income Requirement

Different credit cards have varying minimum income requirements:

The Alliance Bank Visa Platinum Credit Card requires a minimum monthly income of RM2,000, making it accessible to more applicants.
In contrast, the HSBC Travel One Credit Card requires RM5,000, while the CIMB Travel World Credit Cardhas a higher threshold at RM8,333.
If you earn RM36,000 or less per year, your credit limit is capped at two times your monthly income.

For supplementary cards issued to family members, the income requirement usually does not apply.

3. Understand Fees & Interest Rates

Always read the fine print before applying for a credit card to avoid unexpected charges. Key fees to watch out for include:

Interest rates – Ranging from 8% to 18% per annum, interest applies to any balance not paid in full by the due date. To avoid high charges, always pay your balance on time.
Annual fees – Premium cards often come with annual fees, but some basic cards have RM0 annual fees or waive them if you meet specific spending criteria.
Late payment fees – Typically 1% of the outstanding balance, with a minimum of RM10 and a cap of RM100.
Cash advance fees – Withdrawing cash using a credit card incurs high fees (e.g., 5% of the withdrawal amount) with interest accruing immediately.
Foreign transaction fees – Charges may apply when spending in foreign currencies.
Service tax – A mandatory RM25 annual service tax is charged per active credit card.

How to Apply for Your First Credit Card?

Applying for a credit card is straightforward but requires careful consideration. Follow these steps to improve your chances of approval:

1. Compare Cards – Choose a card that suits your lifestyle by considering:

Rewards: Cashback, travel perks, or reward points.
Fees: Annual fees, late payment penalties, and foreign transaction charges. Some cards waive annual fees based on spending.
Interest Rates: Typically 8%–18% per annum. Paying in full avoids charges.
Extra Perks: Travel insurance, purchase protection, and discounts.

2. Check Your Credit Score – Obtain your score from CTOS or CCRIS. A good score improves approval chances and interest rates. If needed, improve it over six months before applying.

3. Prepare Documents – Banks require:

IC (Identity Card)
Proof of Income (salary slips or tax forms)
Bank Statements (past 3–6 months)

4. Apply Online or In-Branch – Online applications via bank websites or comparison platforms (e.g., CompareHero.my) take as little as 10–15 minutes. In-person applications allow for direct assistance.

5. Wait for Approval – Processing takes 1–2 weeks. If rejected, check your credit score and income eligibility. For those earning RM36,000 or less per year, the credit limit is capped at twice the monthly income.