Credit Cards – Tips for Effective Use

7th September 2017
image of credit cards in the back pocket of denim jeans

Ah, credit cards. The symbol of wealth in movies, freedom in shopping and bringer of unimaginable debt. Exaggerations aside, credit cards are excellent financial tools if used correctly. There are usually many nice benefits attached to them as banks want to attract customers to sign up. This includes being able to earn points to exchange for something down the line and discounts at partnered shops.

The dangers of a credit card are real, though. Years ago the Bruneian government came down on banking regulations regarding credit cards. The reason? Any Tom, Dick and Harry could get a credit card and what’s worse, it was approved with a limit beyond the person’s take-home pay. This resulted in people spending money they didn’t have and ended up unable to pay off the cards. Worst of all is accruing compounding interest on the “borrowed” money!

What is a Credit Card and how does it work?

A credit card is a piece of plastic card (sometimes with a chip) that allows you to purchase items instead of using cash. The amount you pay for goods is borrowed to you by the card issuer in the form of an unsecured loan. If you do not pay this borrowed amount back on time (usually within a month), the card issuer can charge very high interest rates! Therefore, the mindset that having a credit card is “free money” is outlandish; it is definitely not free and once we forget this, that’s when we suffer the consequences.

Credit cards usually have similar properties such as:

1. Credit limit

This is the maximum amount you are allowed to charge to your card within a timeframe e.g. monthly.

2. Fees

Credit cards have A LOT of fees. You should check what kinds of fees are added on to your card before you sign up for it. The most common fee is the annual fee which is paid for the service of letting you use a credit card. Other fees include cash withdrawal, late repayment, replacement, over limit and so on.

3. Interest

This is the most important aspect when you’re spending with a credit card. Any outstanding balance on your card is charged interest. The interest rate set by AMBD is 1.5% per month.

4. Added Benefits

Credit cards usually allow the cardholder to earn points based on amount charged to the card. These points can then be converted into cash, airline miles, donated to charities and so on.

Getting Credit Cards in Brunei

You can apply for credit cards in our local banks. The Monetary Authority of Brunei Darussalam (known as AMBD) has implemented a lot of regulations to protect consumers. While this seriously hits spending and competition in business and banking, I think it’s a good thing because many people just can’t control themselves. Credit cards allow you to buy things now and pay later; who wouldn’t want that? Well, people who want to have decent meals throughout the month, probably.

The banks who offer credit cards are (as usual):

  1. Baiduri
  2. BIBD
  3. Standard Chartered
  4. Maybank (They claim to but I can’t find any information online)

If you have followed me for a while now, you will know that I like to advise people to shop around first. Check out all the banks and learn about their terms and conditions as well as fee structure. This is the best way you can make an informed decision when getting a credit card. Key things you need to know before you go and apply are:

1. Minimum age

You should be at least 21 years old to apply for a card as a principal cardholder (main user). However, you can apply for supplementary cards (secondary card) for those at least 18 years of age. Bear in mind supplementary cards also have their own set of fees. Banks are not charities, you know.

2. Income

Only basic incomes of BND500 and above can apply for credit cards.

3. Bank account

You can only apply for credit cards at banks where:

  1. Your monthly salary goes in, OR
  2. You have a fixed deposit account (credit limit will be your fixed deposit amount).
  3. Case-by-case basis. If you don’t fall under the first 2 categories, banks may approve a credit card if they’re satisfied with your background. It is best to contact them to confirm this.

4. Minimum payment

Your minimum payment has to be 8% or more of the outstanding amount. I’ll cover why just paying the minimum is a bad idea below.

5. Loan repayment

You cannot use your credit card to pay for your monthly loan repayments.

Don’ts of Using Credit Cards

Now that you have that shiny new MasterCard or Visa, your responsibilities and self control challenge begins! You will be thinking about accumulating points for that sweet Royal Brunei Airlines miles to claim tickets to Bali, and want to start swiping. But wait! There are some things you should not do as it’s counterproductive to the benefits the card has given to you:

1. Withdraw cash

NEVER withdraw cash using your credit card; that’s what your debit or bank card is for! Withdrawing cash using a credit card always has charges that are about $35 PER withdrawal! If you’re taking out $100 you’re effectively burning 35% of it!

2. Swipe beyond your means

If you are eyeing on a UHD TV and a PS4 Pro, don’t just charge it to your card outright if you don’t have the cash to back it up. Buying things you cannot afford is basically financial suicide. Doing so will lead to…

3. Not paying the loaned amount on time

If you borrow more than you can pay back, the bank will charge interest on the outstanding balance AND there’s late payment fees. To make things worst, if you continue to not pay, the amount of interest added on actually increases because of compounding interest!

4. Don’t use earning points as an excuse

If your reasoning to shop more is to earn points, then it may be counterproductive as you’ll just drain your savings anyway.

Do’s of Using Credit Cards

Now that you’re aware of what not to do, here’s how to maximise your bonus points’ earnings!

1. Pay the balance on time

Honestly, not paying on time is the biggest way you lose money. Different banks have different ways of calculating when your payment is due so consult them and understand this first. There are 2 ways that are effective for paying on time:

  1. Set up a standing order. This is an order whereby the bank will automatically deduct the outstanding from your account each month.
  2. Set a reminder. I do this and it’s been good so far. I like to review all my purchases in case there’s an issue before I pay. So I set a monthly reminder at the last week of the month to look through and settle. Simple as that!

2. Swipe only things you can afford

Meaning anything you can pay with cash, you swipe. This means being a smarter shopper and not spending money you don’t have. An example is getting a TV. If you can afford to drop a bag of cash on the counter to get it, by all means charge it to your card and claim the big points!

3. Take advantage of discounts

There are many discounts for using credit cards. Usually shops and eateries will advertise partnered discounts if you use certain cards. Cheaper spending + points!

4. Know your card’s fees

If you took proper care to learn about the cards each bank provides, you should know what fees will be charged to you and when. This is especially important for annual fees because we might forget and get a shock when we see an extra $100 charged suddenly. Ask your banks if they have any promotions where some fees are waived.

5. Report lost cards immediately

If you lost your credit card or any bank card for that matter, report it to your bank immediately. They should cancel the card so anyone who picks it up or stole it would not be able to make purchases.


Credit cards are extremely convenient shopping tools. With the convenience, however, comes with the danger of high interest debt! But as long as we remember to clear the outstanding balance every month, the purchases we make actually have higher value!

That being said, people who shop on impulse and those who have bad money management to begin with probably should not get a credit card. Because even with regulations to protect consumers in place, the world still has many silly people. And obviously, silly people do silly things.

Procrastination is like a credit card: it’s a lot of fun until you get the bill.

– Christopher Parker

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