Credit Card

Credit cards offer convenience and security in payment transactions, and can help you earn rewards from spending. However, if not managed carefully, credit cards can lead to unwanted consequences such as low credit scores or hidden fees.

1. Fees to note when using a credit card

  • Annual fee: This is the fee to be paid each year to own a credit card. Many banks in Vietnam such as Vietcombank and BIDV offer credit cards with no annual fee.
  • Annual percentage rate (APR): This is the annual interest rate applied to the credit card balance. This interest rate can range from 15% to 30% per year depending on the type of card.
  • Balance: This is the amount you owe on the credit card. This balance must be paid on time to avoid high interest rates.
  • Credit limit: This is the maximum amount you can spend on the credit card. This limit depends on your income and credit history.
  • Credit rating: An assessment of your ability to manage debt. A good credit score will make it easier for you to borrow money or open a new credit card.
  • Introductory interest rate: This is the promotional interest rate during the initial period of the credit card, usually lower than the standard interest rate. You need to pay attention to the promotional period and the standard interest rate when the introductory program ends.
  • Minimum payment: This is the minimum amount you must pay each month to maintain your credit card account.

2. Advantages and disadvantages of credit cards

  • Advantages:
    Instant purchasing power: Credit cards allow you to spend immediately without having to pay immediately. This is useful in emergency situations.
  • Protection: Losing cash can be devastating, but losing a credit card is easily solved by locking the card immediately.
  • Record keeping: Credit card statements help you track your spending and manage your budget effectively.
  • Rewards: Some credit cards offer rewards such as cash back, free travel when you spend on the card.
  • Disadvantages:
    High interest rates: If you do not pay off your balance in full each month, you will have to pay high interest rates, which can be up to 30% per year, increasing your financial burden.
  • Hidden fees: In addition to interest rates, credit cards also have cash withdrawal fees, late fees, and foreign currency conversion fees.

3. Managing credit cards in Vietnam

In Vietnam, major banks such as Vietcombank, BIDV, and VietinBank offer many types of credit cards with different interest rates and incentives. However, to use credit cards effectively, you need to:

  • Track your spending to avoid spending beyond your financial capacity.
  • Pay on time to avoid high interest rates and maintain a good credit score.
  • Use credit cards responsibly: Only spend when you are sure you can afford to pay.

Credit cards are a useful financial tool but can be risky if not managed properly. To get the most out of your credit card, you need to understand the terms, manage your spending and always pay on time. If you use your credit card wisely, you can increase your personal finances and earn attractive rewards.

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