Tan Kin Lian's Blog: Restrict the issue of credit cards

Wednesday, October 08, 2008

Restrict the issue of credit cards

Hello Mr Tan,
Someone said that credit card facilities to consumers need to be tightened up, to prevent situations where a person gets multiple credit lines from many banks. Do you have any ideas on how this can be done?

Journalist

MY REPLY

It is important to educate consumers to avoid borrowing on credit cards. The interest charge on late payments could be as high as 2% per month. This works out to 24% a high. It is extremely high.

Many consumers borrow excessively on credit cards and incur large debts with high interest costs. They are not able to cope with the debts, and have to declare bankrupcy.The number of these cases have been increasing in alarming proportions - according to insiders who are involved in collection of credit card debts.

I suggest that MAS should require all banks to provide data into a central database managed by MAS on the credit cards taken by individual persons. Each person should be limited to a maximum of two credit cards. The total credit limit on these cards should be limited to two months of salary.

Banks should not be allowed to issue credit cards, if an individual already has two cards. Exceptions can be made for high net worth individuals who need more than two credit cards.

9 comments:

nhyone said...: You can get some interesting statistics from the Credit Bureau of Singapore: http://www.creditbureau.com.sg/ (Under Credit Pulse)

What I find interesting is that there are 1 million credit card holders and 38% of them carry a balance!

The average balance statistics is not really useful because I asked the Bureau and they replied that it includes the amount charged for the current month (before you pay for it). You can't tell how much people actually carry over.; October 08, 2008 6:36 PM
Anonymous said...: The information is already under CBS. The bank will get a copy of the record when approving the card anyway. As for whether they care how many cards the customer already has, I leave that up to you to guess.; October 08, 2008 11:52 PM
Anonymous said...: financial literacy and education is more effective than over-regulation, i.e. the restriction imposed on the number of credit cards and the credit limits.

over-regulation, to a certain extent is like, expecting the gahment to spoon feed us all the way from birth to grave. I disagree with Mr. Tan Kin Lian's suggestions; October 09, 2008 1:09 AM
Anonymous said...: I agree with education and regulation. De-regulation in US over period of time has resulted a catastrophic disaster in global economy. I believe regulation needs to be there to balance human's greed and fear. Human is not perfect, let's face it.; October 09, 2008 9:04 AM
Anonymous said...: Try to use a debit card or NETS instead. Only keep one credit card aside for emergencies. MAS can revise the minimum income for owning a credit card from SGD30,000of annual income to SGD60,000 instead.; October 09, 2008 11:07 AM
Anonymous said...: credit card biz is one of the most profitable biz in the world, due to the weakness of human, the 'dis-ability' to handle credit well...

On the other hand, this actually helps bank with their bottom line, if not how are they going to 'add value' to shareholders? DOn't forget you guys wants the 5% dividend from the banks' preference shares. if they are not profitable, how are they going to pay all these 'borrowings'?; October 09, 2008 10:59 PM
Anonymous said...: i am amazed when my office cleaner earning $900 a mth told me she borrowed $400 from her credit card becoz she was short of cash that particular mth. I asked what is her credit limit and she told me it is $500. It is obvious she doesnt meet the #30k pa min salary but how did the credit card co manage to smuggle and approved her application? The the credit card co is aware she is poor and ie why give her a limit of $500 only. So where is MAS governance here?
Anyway, I told her to repay it quickly and she told me she was charged $15 extra when she paid up 1.5 mths later and that works out to be 24% pa. Such poor thing lady, she doesnt even have an ATM card but yet is holding a credit card and she has the pin to withdraw the loan when she needs it...Sigh....; October 10, 2008 12:44 AM
Anonymous said...: I think there's regulation to allow credit limit below 500$ without any income requirement.; October 10, 2008 12:01 PM
Anonymous said...: Each American these days has a few hundreds of dollars debt with his credit cards. And still banks keep on issuing them. Sometimes credit cards cause serious financial troubles for the card holders since many companies issue them to get money and then disappear. On this great site www.pissedconsumer.com you will find customers’ reports about different Credit Cards frauds.; October 14, 2008 10:53 PM