(03-12-2013, 05:03 PM)CityFarmer Wrote: MAS Financial Stability Review (FSR) of Dec 2013, is published. It is a good source to understand the financial status in Singapore.
In page 46, on "Credit Cards and Unsecured Credit". Average cardholder having about five (5) cards, it is more than I expected...
"Some households could have taken on excessive credit card debt. In the first nine months of this year, the number of cards in active circulation increased from 9.4 million to 9.7 million, which translated to an average cardholder having about five cards. While the growing use of credit cards can be attributed to the marketing activities of banks and credit card companies, the convenience provided by such cards and rising income among households, it could also lead to excessive credit card borrowing."
I'm not surprised.
These days when you apply for 1 card, the promoters would offer 2-3 others. I guess they are paid commission per card. And banks have promotions that give freebies when you apply 2-3 cards from them (some add on first transaction requirement).
Cards in circulation do not translate to cards in use. Maybe a better picture would be filtering at least 1 transaction in the last 2 years.
One of my colleague has at least 1 card from each bank. That is easily over 10 cards. I have 5-6 cards from my main bank alone. I am guilty of "freebies application behaviour". There are ~2-4 cards in the past 3-5 years that I applied due to wanting the freebies. Cash credit, free check-in luggage, free cabin luggage. All I needed to do was to mostly make 1-3 transaction of any value, or a small value of $50. The highest was $500. None resulted in extravagant spending, maybe premature spending on items I'll surely need or temporary using a different card. After meeting the freebie requirement, those cards are usually never to be used again.
While to a small degree I agree the many cards could lead to excessive credit card debt, there are limitations. Previously/today, you have the same total limit with a bank regardless of the number of cards. Can get into the same debt with just 1 card. You get into trouble if you apply and max out on all the banks though. 12 banks x 4x credit limit = 4 years annual salary borrowings...
On a whole, credit card is a tool that supports "the rich getting richer". I can apply for credit cards and I have the benefits of savings from cash rebates, outlet discounts, etc. If I were making below 30k pa then I would be spending that much more in the absence of discounts and rebates.
While troublesome, I have a number of active cards for various uses:
1. UOB PRVI AMEX. 1.6 miles for $1 local spend and 2.5 miles for $1 foreign spend. Useful when I travel on business trips. Hotel charges gives me way more miles than my flight. Charge my utilities i.e. mobile/broadband to the card and squeze more miles than with other cards. Using GIRO I get nothing in return for this "necessary" spending.
2. UOB Preferred AMEX. 4 miles for $1 in most dining places. When I am on business trips and dines on credit, gives me even more miles.
3. UOB Preferred VISA. 4 miles for $1 for PayWave, or online transactions. Useful when I occasional by off eBay, or supermart (Cold Storage, NTUC, etc. and some restaurants that do not take AMEX but has PayWave).
4. SCB Manhatten. Used to be 5% rebate on 2-4k charged on that month. When there're big ticket items, this is the card to use. I once paid my school fees using this card and got savings in the hundreds. Many get all their friends and relatives to apply for this card and split pay wedding dinner bill for the savings in the thousands.
5. OCBC Robinsons. 5% rebate when shopping at Robinsons. Eligible for the great sale discounts. Occasional wedding gifts for friends or household stuff. Bedsheets, shoes, etc. It's real savings if you do not buy things you do not really need.
6. Maybank. When I happen to go across the border there's 5% rebate on petrol. Even if with friends they save additional 2-3% (after taking account of the forex rate).
7. BoC UnionPay. I just applied last week as I am travelling to China in Dec for holidays. My previous experience taught me that Visa/Master/AMEX acceptance pales in comparison with UnionPay. Using it to carry less cash for security and emergency. Bonus that they are giving free data SIM and maybe I won't have to buy one.
I have other inactive cards so I guess I have at least double the average...
I always get waiver and never pay annual fees. I always pay on time and in full. Do I get into more borrowing? Technically yes, but practically no. I get the extra credit days with that little bit of money in the bank earning that bit more interest. I keep less cash with me so the little extra interest as well (if it is even significant haha). I carry less cash when I travel and feel safer. I get the discounts and rebates compared to paying via NETS or cash. I earn rewards points that you can use to offset phone bills, etc. or pay a small service fee to convert to miles for "free"/cheap air tickets for leisure. (Oh, in case anyone is not aware, the "miles" are actually reward points). I am in fact better off with more cards.
Now if any broker allow payment of shares using credit card I would make use of it as well, to earn the points/rebates, and not the extra credit days or for contra.
It's true though that managing many cards can be a headache. Sometimes when I travel on weeks and forget a payment, it incurs late fees and interests but I managed to get it waived on the 2-3 occasions based on my good payment record.
Not trying to sell credit cards or encourage taking on credit card borrowings. Just putting it such that with prudence and discipline it actually has value too. It is "near riskless".
I am sure there're others who has a bevy of cards for their petrol/grocery/movie needs that is real savings and not wanton spendings, just like I have friends who only use 1-2 cards.
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