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5 credit card mistakes to avoid – my personal mistakes too!

As a Certified Financial Planner and Licensed Islamic Financial Planner, I have the capacity to assist my clients in redesigning their debt restructuring programme. Of course, this comes with thorough planning as well as one’s eligibility to apply for a new financing so that all debt could be consolidated into one master plan.

These planning wouldn’t have happened if I had not gone through this process myself, on my personal finances.

When I was in my 20s (and not yet a Financial Planner), I was careless with my money. I swiped my cards to the maximum. That was the only way to survive then.

Years later + wisdom knocking on my door, I was finally able to take charge of my credit card debt, paid off all and whenever I swiped, be it for zero instalment plan or for monthly expenses, I would ensure I would not fall back into the same debt trap again.

Here are the top 5 credit card mistakes to avoid – and these came from my own personal experience too!

1) Applying for conventional cards instead of Islamic cards

Gosh, just thinking about it makes me cringe. I overlooked the riba’ element. That’s why they say ignorance has its price. Once I discovered the dosa behind riba’, that was when my transformation took place, by hijrah-ing from conventional to Islamic cards. It wasn’t an easy process to hijrah because not all banks offer Islamic cards and because of this limitation, I could not get a good Islamic credit card with the credit limit that could match my previous credit limit + with good points system. The trade off!

There was only one bank that permitted transfer of credit limit + credit card facility from conventional to Islamic. And the bank is Maybank! Such a Maybank fan, lol.

If you’re in the midst of applying for a card, do consider Islamic cards. We want to spend and get pahala, not dosa ie: riba’.

2) Going on a shopping spree using the money I didn’t have 

I had my first two cards from Maybank, just before my Eurotrip (think Bicester Village, La Vallee Factory Outlet, Longchamp and more) in 2012. I was still in my 20s then. I came back with beautiful bags and a mountain of debt.

Owning a credit card is also about managing our emotions. It made me think that I could splurge and reward myself whenever I pleased. Sure guys, credit card is super helpful when we travel and you may need a conventional card when you’re abroad in case your Islamic card cannot function ie: swiping your Islamic card at a merchant that may not be recognised as halal by the card. So treat the swiping with exception. However, when you’re spending locally in your own country, always prioritise Islamic cards.

3) Having a maxed out card and a Balance Transfer programme simultaneously

This is the dumbest thing that I have ever done. I used to maxed out multiple cards. I thought I was being smart by placing my credit card debt on a Balance Transfer programme, where this programme would merge the outstanding amount and divide it by 6 or 12 months. Once the programme commenced, I felt at ease because it meant I was controlling my debt and paying instalments that matched my affordability.

Then came another sale, or another impromptu purchase, I swiped the card with zerorised debt and ended up maxing out the card again. Hah! So smart, Aisya.

4) Not upgrading my credit limit or applying a new credit card with better perks after I file for income tax yearly

If you don’t know it yet, let me share this trick. Everytime after you have filed for income tax, go and knock on your bank’s door or a new bank, apply for a card with high credit limit and with amazing points system. I’m gonna quote Maybank Islamic again. Their Treats Points have helped me to purchase so many gadgets ie: Dyson, iPad at a discount.

Some may say that they are afraid to have high credit limit because they don’t trust themselves and they’ll just spend it. If you’re this type, then don’t apply. It will just backfire.

But if you’re someone who can control your spending (this takes practise, I swear), then go ahead and increase your limits. Because in the long term, this little thing like having higher credit limit matters. You’ll appear as credit worthy to the bank. It helps to increase your debt service ratio (only when the card has zero spending ok).

5) Applying for a credit card with zero loyalty or points system

I had another card from the bank I used to work for. To this day, the card is still pink in colour. I applied because the card was pink. It had zero points system! I finally terminated the card. In credit card, black card matters, not pink (note to self).

If you’re going through a phase where your debt seems unmanageable and you have nowhere to go to talk about this, reach out to me or listen to my pre recorded online course at http://bit.ly/aisyacourse. In this course, I spent an hour talking about debt and how to restructure your debt so that you can pay it in a shorter tenure.

Looking back, I’m grateful for these mistakes. It has definitely made me become more aware in the way I manage my debt and finances. Hope it will do the same for you too!

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Independent Financial Adviser. [F]

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