The Association of Banks in Malaysia (ABM) has just announced today that the interest rates for credit cards will be reduced by between 0.5% and 1.5% for Tier-1, Tier-11 and Tier-111 credit cardholders while late payment fees will be slashed to a minimum of RM5 and a maximum of RM75 effective 31 March 2009.
Interest rates for Tier-I credit cardholders who promptly settle their monthly minimum payments for retail purchases for 12 consecutive months will be reduced to 13.5% per annum from the current 15%.
For Tier-II cardholders who promptly settle their minimum payments for 10 months or more in a 12-month cycle will also benefit as the relevant interest rate will be reduced to 16% per annum from the current 17%.
Cardholders who don't fall within the 2 categories and who are generally termed Tier-III cardholders will see the interest rate for them come down to 17.5% per annum versus the current 18%.
The present late payment fee of a minimum of RM10 or 1% of the total outstanding balance, subject to a maximum of RM100 will be revised to a minimum amount of RM5 and a maximum of RM75.
This will not have any effect to good paymasters who settle their credit card bill in full payment every month, which is a very good financial discipline allowing them to enjoy 0% interest for at least 20 days, as they will still remain free from any interest charge. For Tier-I cardholders who never default their payment, they will enjoy one of the lowest credit card interest rate in Asia at the rate of 13.5%.
I would advise that although the interest rate will be reduced soon, you should never get yourself into Tier-II or Tier-III, as the compounded interest rate is still very high.