Learn about bank cards

“THE BANK IS YOUR FRIEND” – this is true. However, you need to know how to effectively use banking services. Understanding how banks work and support your life will help you to achieve your financial goals faster. The simplest and way is a bank card, a “powerful” card that can be used in place of cash. Some cards can be used as an “advance” for spending activities.

When Mai was a student, she preferred to use cash. She liked the feeling of always having cash in her pocket “just in case”. However, cash didn’t make her richer and she started to worry that her spending was getting out of control. So, she switched to a bank card instead.

Types of payment cards

A payment card is a means of non-cash payment. There are many types of payment cards, but the basic types are credit cards, debit cards, and prepaid cards:

CREDIT CARDS

Credit cards allow Mai to “buy now, pay later”. That is, the bank will provide her with a spending limit (advance money), and she will use that limit to pay direct or online bills for goods. Upon about 45 - 55 days, depending on the card type, she has to repay for the previous spending. In order to get this card, she needs to have a regular income or prove her ability to repay a bank loan.

DEBIT CARDS

Debit cards only allow Mai to use the money she has in the account provided by the bank. That is, she can only pay, transfer, withdraw cash at an ATM, or make other transactions within the amount of money she has.

PREPAID CARDS

Mai does not need to open a bank account to get a card, she simply needs to buy a card and then add money to the card to spend. Prepaid payment cards are similar to prepaid phone SIMs. Prepaid card is a special form of payment card that does not require issuance by banks or credit institutions.

TOP-UP PAYMENT CARDS

Top-up payment cards allow you to top them up after the first use. For example: Bus card, travel card, or payroll card.

GIFT CARDS

Prepaid cards that can't be topped up. These cards can be given as a gift and are valid until the balance is exhausted.

PAYROLL CARD

A payroll card is an alternative payment method to traditional salary payment. The cardholder’s income is transferred directly to the card.

CARDS FOR TEENS

Parents can educate their children to be more responsible in financial management and control their children’s spending with this card (often popular in developed countries).

TRAVEL CARDS

Travel cards are a more secure payment method than carrying cash or travel checks. Some types of travel cards provide services such as: compensation for lost luggage, replacement for lost cards, and cardholders are not responsible if the card is lost or stolen.

Which card is recommended?

With experience in financial management, Mai opted for a bank card with 2 separate accounts: one for consumption and one for savings. When learning about the banks' interest rates, she found that she could take advantage of a credit card to shop up to 45 days in advance with no additional fees or interest and receive discount codes for Shopee and Grab to go shopping online or use services at bargain prices. Thanks to those outstanding advantages, Mai finally chose to open a credit card. Mai set herself a consumption budget of VND 2 million/month, equivalent to no more than VND 500,000/week. In other words, Mai can shop online, go out for coffee with friends, or do anything as long as the maximum limit is VND 500,000/week.

After a period of use, Mai noticed that her financial situation had significantly improved since making her smart consumption plan, so she opened a deposit account, which offers an even better interest rate.

Unlike Mai, Tuan has been working for a long time, so he has a higher income. He still prioritizes bank cards when spending instead of cash, especially credit cards due to their benefits. Using a card is very convenient because he doesn’t have to carry cash and payment is quick and easy. In addition, he can also build good credit through his credit score and enjoy credit card offers.

Tuan often uses a premium credit card, so he can “buy now and pay later” and take advantage of other credit offers. There were times he urgently needed an important deposit for some contracts but didn’t have enough cash due to the large- value deposit. However, with a compact credit card, Tuan is able to deposit with a credit account without missing a lucrative business opportunity.

Rules of using a card

If you choose a credit card like Tuan and Mai, here is a set of rules that you should follow.

KEEP TRACK OF TRANSACTIONS AND GET INTO THE HABIT OF CHECKING YOUR ACCOUNT B ALANCE

You should check your account regularly (online via a banking app or visit a bank transaction office) to detect and promptly report any anomalies such as fraudulent fees or unauthorized transactions. This will help you avoid any unnecessary losses. In addition, checking your account is also a way for you to manage your money and know your financial health. Monitoring financial data on your account every day makes you face transaction information and your financial limits in an honest manner for timely awareness and adjustment.

MAINTAIN SECURITY

Firstly, you need to keep the PIN (password) of the card safe and you must not share it with anyone. When generating a PIN, you should incorporate a random number that makes sense to you and is hard to guess for others such as “230817” (the date you received your diploma is 23/08/2017). Do not use your date of birth as your password because these numbers are quite predictable (people around you will know it, or it may be available publicly, especially on social media, where information is exposed with low security). Additionally, you keep your credit card with you as much as possible and avoid losing it or dropping and damaging it because if it falls into the wrong hands all your money could be taken. If you lose your card, immediately report the theft via hotline number or to the nearest bank branch. You can also set up SMS alerts to receive messages if any unauthorized transactions occur. This is especially important with credit cards because each transaction affects the cardholder's credit score, so if there is any doubt about your card’s whereabouts, call your the bank and block the card immediately.

UNDERSTAND THE CARD’S TERMS OF USE

It is no coincidence that advertisements for most products emphasize: “Read the user manual carefully before use.” That’s right, you can't use something you don't understand well, unless you want to lose your rights and get into trouble. Therefore, you need to know information such as: the conditions for opening personal credit cards, required fees, debt repayment deadlines, and late repayment terms when using credit cards. Clearly identifying this information will help you understand your rights and obligations when using a bank card. Once you understand the card’s opening conditions, you know what information you must provide to the bank or financial institution and how to avoid paying unnecessary fees, for example.

AVOID WITHDRAWING CASH FROM A CREDIT CARD

When you go to an ATM and withdraw cash from your credit card, you are temporarily borrowing cash from the bank. Therefore, the amount you withdraw with the card is considered a credit balance, not a regular withdrawal like with a debit card. When withdrawing cash with a credit card, you will be charged a fee by the bank for the amount you have withdrawn. This fee is usually around 4% at the time of withdrawal, not to mention the minimum requirements. For example, when the bank stipulates a fee of “4% of the transaction amount with a minimum fee of VND 60,000”, it means that if you withdraw VND 1 million in cash using a credit card, instead of a VND 40,000 of withdrawal fee (4% of VND 1 million), you will be charged VND 60,000 (minimum amount set by the bank). This fee may vary between banks or financial institutions, so you should also consider this factor when choosing a credit institution.

PAY ATTENTION TO YOUR CREDIT SCORE

Your credit score is one of the most important measurements of your financial health. In fact, improving your credit score through effective use of your bank card will save you time and money. For example, the higher your score, the more attractive you are to a financial institution and thus you are more likely to successfully apply for a loan with more favorable interest rates. We will discuss credit scores in a later chapter.

TAKE ADVANTAGE OF CREDIT CARD OFFERS

Paying attention to credit card benefits and offers will help you take advantage of opportunities when using a credit card. Currently, many banks and financial institutions have incentive programs to retain customers, in particular offering rewards such as monetary incentives and bonus points, or more practical rewards such as suitcases, phones, and trips.

In addition, credit cards also provide discounts when spending at shops and restaurants, promotional offers on major e-commerce sites such as Shopee and Lazada, and reductions in shipping charges when using Grab and Gojek. Plus, for shopaholics, using a credit card to buy things with an interest- free credit period of up to 45 - 55 days is undoubtedly an attractive offer. These are all benefits that smart consumers should not miss.

Be a smart bank card user! Learn carefully about the card type, functions, and incentive programs of the card issuer before you choose.