4 Things to Know Before Getting Your First Credit Card

CompareHero.my Team

CompareHero.my Team

Last updated 05 July, 2021

Credit cards definitely do come with their own benefits and challenges, which can make it even more exciting for first-timers. Firstly, it’s a huge milestone to be able to get that card, and secondly, it’s a big adjustment. We don’t mean to scare anyone but credit cards do come with significant risks if it’s used irresponsibly. But if you can make sure that isn’t the case, it’s a fantastic yet efficient tool in your pocket! 

Nonetheless, before going on this credit card journey, here are five things you need to know. 

1. A security deposit helps

A credit card is considered a type of loan that you can borrow from again and again as long as you establish a record of paying it back. A more technical term for this is an unsecured credit card, which means the loan made to you is not secured by any type of collateral. 

A secured credit card, however, requires you to first put down a cash deposit. And your credit limit will typically be close to, or equal to your deposit. The idea of this is that because it’s your first time, they do not know what kind of person you are and not sure if you can pay the money back. By having a cash deposit, they’re going to feel much safer by giving you this card. 

It’s a great way for students and fresh graduates to get a credit card to build their credits while enjoying some benefits of a credit card. As you use the card responsibly, you can request to reduce your cash deposit, increase your credit limit, or even convert entirely to an unsecured card. 

2. Your first credit card can make or break your credit score

One of the main reasons to get a credit card in your 20s is to build your credit score, but if you’re not careful, it can have the opposite effect. The way it works is a report of your credit card activity will be sent to the authorities and they will compile it, which then forms the basis of your credit scores. 


Here are a few ways to use your credit card responsibly and maintain a good credit score: 

  • Always pay your bill on time - Not only does a late payment hurt your credit score, but it can also lead to penalties or that you’ll have to bear some fees. Set a goal to pay your credit card bill on time every month. Set an alarm if you need to.
  • Keep track of your monthly statements - First, go through the customer agreement before you start using the card. That statement will tell you when your due date is, fees, interest rates, and all the information regarding your card. Then, make sure to double-check your monthly statements before paying the bill.
  • Stay below your credit limit - While you’re only required to pay the minimum requirement, it’s almost never a good idea to delay the payment and let the interest charges and credit card debt snowball.

Related: 6 Ways To Improve Your Credit Score

3. Check the rates and fees before applying

In Malaysia, the law requires credit card issuers to disclose certain terms, such as interest rates and fees before allowing you to sign the documents. Here is some important information that you ought to know: 

  • Annual fee - What it charges cardholders on a yearly basis.
  • Annual percentage rates (APR) - This is the interest rate that you’ll pay on balances you carry from month to month. Bear in mind that there may be different charges according to types of balances such as purchases, balance transfers, or cash advances.
  • Foreign transaction fees - Maybe not in the COVID-19 era, but hopefully, we’ll someday be using our cards in a foreign country. But before that, check the transaction fees.
  • Late fees - Imagine this as the penalty for paying it late or not being able to pay the minimum required amount.

Another thing to note is that most of this information will only be disclosed after you apply or after your application is approved. 


4. Provides more safety than a debit card

It can be quite intimidating as you make your first purchase using your new card, but it doesn’t have to be. In fact, it’s actually much safer compared to when you’re using a debit card, here are a few reasons why that’s the case: 

  • You pay with the credit card company’s money - When a crook gets access to your debit card information, they will have access to your entire bank account and can empty it if they want to. But for a credit card, if you have proof that you did not make the payment, you’ll have plenty of time and room to dispute it while keeping your savings safe.
  • Easy to get a replacement - All it takes is one phone call to your issuer telling them about the fraud and you’ll be receiving a new one in a few days. 

Ready to apply for a card? 

Now that you know how a credit card works, have a look at the best credit cards in 2021 and see if that’s a good fit for you! 

The CompareHero.my team is comprised of many talented individuals, sharing their knowledge, experiences and research to help others make better financial decisions.


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