| ARTICLE SUMMARY A credit card EPP advertised at 0.88 percent per month carries an effective annual interest rate of approximately 19.2 percent, which is comparable to the revolving rate it replaces and significantly higher than a personal loan available at 8 to 10 percent flat per annum. The gap between the advertised flat monthly rate and the true annual cost is the central fact most cardholders miss when evaluating an EPP offer. This article demonstrates the full calculation and provides a direct cost comparison so borrowers can make an informed decision before accepting any EPP. |
What an EPP Is — and What It Is Not
An Easy Payment Plan converts a credit card outstanding balance or a large retail transaction into fixed monthly installments over a defined period, typically between 6 and 36 months. The bank advertises a handling charge stated as a monthly rate, often presented in the form of 0.88 percent per month. This figure sounds modest until it is converted to its annualised equivalent using standard financial methodology.
Why a Monthly Flat Rate Is Not What It Appears to Be
A flat monthly rate is applied to the original outstanding balance for every month of the plan, regardless of how much principal has already been repaid. This is structurally different from a reducing balance rate, where interest accrues only on the remaining amount owed. The distinction translates into a significant difference in effective annual cost.
| EPP Calculation — Step by Step | |
| Outstanding Balance Converted | RM 10,000 |
| Bank Advertised Rate | 0.88% per month (flat) |
| Tenure Selected | 24 months |
| Total Handling Charge | RM 10,000 x 0.88% x 24 = RM 2,112 |
| Monthly Instalment | (RM 10,000 + RM 2,112) divided by 24 = RM 504.67 |
| Effective Annual Interest Rate (approx.) | Approximately 19.2% per annum |
At roughly 19.2 percent effective annual rate, you are not really escaping the cost of revolving credit. You are just paying it in a different structure. The reason it ends up that high is that the flat rate gets applied to the full original principal every single month, not to whatever you actually have left to pay off.
A Direct Comparison: EPP Versus Personal Loan
| EPP at 0.88% per month | Personal Loan at 8% flat p.a. | |
| Principal | RM 10,000 | RM 10,000 |
| Tenure | 24 months | 24 months |
| Total Interest or Charges Paid | RM 2,112 | RM 1,600 |
| Monthly Payment | RM 504.67 | RM 483.33 |
| Effective Annual Rate (approx.) | 19.2% | 14.5% |
In this comparison, the personal loan saves you RM 512 in total financing charges. That hap gets wider the larger the balance or the longer the tenure, so it is worth doing the comparison properly before deciding. Under Bank Negara Malaysia’s product disclosure requirements, lenders are obligated to tell you the Effective Interest Rate. Always ask for this figure explicitly before committing to any EPP arrangement.
When an EPP Remains a Sensible Choice
• The bank offers a genuine zero percent EPP for a promotional period. These are commonly available on large retail purchases and represent genuine interest-free financing.
• No personal loan facility is accessible to the cardholder due to credit constraints, making the EPP the most regulated available alternative.
• The balance being converted currently accrues revolving interest at 18 to 22 percent. Even an EPP at 19 percent effective annual rate eliminates the compounding risk of revolving debt.
Questions to Ask Before Accepting Any EPP Offer
• What is the handling charge expressed as an Effective Annual Rate as required under BNM disclosure guidelines?
• Are early settlement fees charged if the plan is repaid ahead of schedule?
• Does converting the balance reduce the available credit limit on the card during the EPP tenure?
• Is there any processing or conversion fee charged in addition to the monthly handling charge?
Conclusion
Every EPP offer is worth scrutinising before you say yes, especially when there may be a cheaper option sitting right next to it. If you want an independent read on the most cost-effective way to handle your credit card balance, the team at AE Finansure can walk you through what makes sense for your situation.
| SOURCES & REFERENCES Bank Negara Malaysia — Product Transparency and Disclosure Guidelines https://www.bnm.gov.my/documents/20124/826852/rfl.pdf Bank Negara Malaysia — Credit Card Industry Regulation https://www.bnm.gov.my/financial-consumer-alert CCRIS — BNM Central Credit Reference Information System https://www.bnm.gov.my/ccris Financial Consumer Agency — Understanding Credit Card Costs https://www.bnm.gov.my/consumer-financial-education |
