Most people heard the 9% vs 18% and immediately conclude it is a good offer, but is it really? No, it is NOT! I took the carrot sometime mid this year, with the intention to settle my credit card at one go. But now about 6 months down the road, after some thinking and calculation, it was not a very good decision, despite whatever the telemarketeer tells you.
The following is the explanation:
Assuming you take RM5,000 cash advance (Cash Treats, EZcash, etc.. all same thing) with a 9% per annum interest, with RM100 processing fee and no early settlement fee, sounds good right? So it worked out as per below:
|Total to pay||6,640|
But what if you charge that amount to your credit card, but you plan (with good discipline) to pay the bank RM500 every month off the principal amount (RM6,000) plus whatever interest the bank charges for that month on that principal. Assuming 15% p.a. interest rate, which most people with good payment record get from their bank.
|Month||Balance||Amount off the principal||Interest||Total amount to pay|