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04-12-2011, 06:52 AM
The Straits Times
Dec 4, 2011
YOUR LETTERS
Banks going overboard with credit line offers
It used to be that if one could not afford something, one would either save up for it or live without it.
Borrowing to finance a lifestyle beyond one's means violated virtues like frugality and prudence. It also lulls one into believing that resources can indeed be unlimited even as wants keep growing. The resulting consequences can be disastrous, such as debts that threaten to spiral out of control and loss of credibility from the failure to service such borrowings.
The banks are changing all that, with all-out campaigns to get people to sign up for credit lines which promise quick and easy cash, as well as free gifts and monthly interest discounts.
Sometimes, people who do not meet the income requirements of such credit lines are also invited to undertake balance transfers - a euphemism for unsecured loaning from banks.
There is something very disturbing about emphasising the amount of money one would save and the instant gratification one would derive from borrowing money.
In one bank's promotional blitz, a 40per cent rebate on monthly interest is offered. It also adds that, compared to 'interest rates of 24per cent per annum on other banks' credit cards', its customers, who pay 5.41per cent interest per annum for their loans, enjoy savings of 78per cent.
At another bank, the seduction lies in 'seizing opportunities', 'living life to the fullest' and 'getting the holiday you deserve' - all with money that you do not have.
Paying 5per cent interest to satisfy one's cravings for material pleasure and goods makes bad financial sense, especially with banks paying close to nothing for deposits.
I am not against banks doing business, for the supply of liquidity has always been critical to economic activity and growth. Moreover, there are good loans, including those which help people to accumulate assets and tide over difficult periods in life.
What I am against are the indiscriminate soliciting of application for credit lines by banks' agents, and banks equating liabilities (borrowings) with freedom, pleasure and assertion of the self.
While legal moneylenders are banned from publicising their services, banks are allowed to openly entice people into borrowing money to finance a somewhat impossible lifestyle.
Lena Soh (Ms)
Dec 4, 2011
YOUR LETTERS
Banks going overboard with credit line offers
It used to be that if one could not afford something, one would either save up for it or live without it.
Borrowing to finance a lifestyle beyond one's means violated virtues like frugality and prudence. It also lulls one into believing that resources can indeed be unlimited even as wants keep growing. The resulting consequences can be disastrous, such as debts that threaten to spiral out of control and loss of credibility from the failure to service such borrowings.
The banks are changing all that, with all-out campaigns to get people to sign up for credit lines which promise quick and easy cash, as well as free gifts and monthly interest discounts.
Sometimes, people who do not meet the income requirements of such credit lines are also invited to undertake balance transfers - a euphemism for unsecured loaning from banks.
There is something very disturbing about emphasising the amount of money one would save and the instant gratification one would derive from borrowing money.
In one bank's promotional blitz, a 40per cent rebate on monthly interest is offered. It also adds that, compared to 'interest rates of 24per cent per annum on other banks' credit cards', its customers, who pay 5.41per cent interest per annum for their loans, enjoy savings of 78per cent.
At another bank, the seduction lies in 'seizing opportunities', 'living life to the fullest' and 'getting the holiday you deserve' - all with money that you do not have.
Paying 5per cent interest to satisfy one's cravings for material pleasure and goods makes bad financial sense, especially with banks paying close to nothing for deposits.
I am not against banks doing business, for the supply of liquidity has always been critical to economic activity and growth. Moreover, there are good loans, including those which help people to accumulate assets and tide over difficult periods in life.
What I am against are the indiscriminate soliciting of application for credit lines by banks' agents, and banks equating liabilities (borrowings) with freedom, pleasure and assertion of the self.
While legal moneylenders are banned from publicising their services, banks are allowed to openly entice people into borrowing money to finance a somewhat impossible lifestyle.
Lena Soh (Ms)
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Grrr...
