Thursday, July 26, 2007

In Debt We Trust Part 3 : Leong Sze Hian writes....

Part 1 here and Part 2 here
I'm 100% disappointed with Leong Sze Hian's lack of faith that our MAS & govt has thought through this issue carefully (see letter below). Citibank has said the purpose of their new credit card aim at students without income is to educate our students on credit. With Citibank offering free education to our students, I'm dismayed that Leong Sze Hian does not show appreciation for this fact.
Mr. Leong goes to say that we should copy Malaysia and cap credit card interest rate at 15% APR to stop predatory practices by banks. Absurd! Absurd! Absurd! This is an insult to our extraordinary govt and ministers - how much our ministers are worth vs Malaysian know the answer. If Mr. Leong has nothing to do please don't insult our esteemed govt by asking them to copy Malaysia. Malaysia should always be copying Singapore. In fact the interest rate on those student credit cards is a whopping 28% - the idea is to teach our students that it is a good idea to borrow money at 28% if they have an emergency, for example, if they like the $400 Hugo Boss shirt on offer very much they should just go ahead and buy it otherwise the offer will be gone.
The govt of Singapore and MAS works for the interest of ordinary Singaporeans....and when it comes to student credit cards there is alot of interest involved - a whopping 28% APR. It is just incidental that our credit card laws have boosted bank profits tremendously and some of these banks happen to be GLCs (Govt Linked Companies). If anything, it launches our students and those without income into the Golden Period of easy money, spending and more spending. This is consistent with the govt call for Singaporeans to work longer, if you have debts it is likely you end up working until the day you die.
Students and those unemployed may not be disciplined enough to control spending
Letter from Leong Sze Hian
I REFER to the article, "A credit card for the young" (July 19).

The new card — aimed at students and young adults who do not earn enough to qualify for a regular credit card — will offer a higher interest rate of 28 per cent on rollover balances.
While I understand the rationale for making credit available to those who earn less than $30,000 a year, why is the interest charge so high? Those who roll over their credit balance may end up doubling what they use and owe, every two years or so.
We may be able to take a leaf or two from Malaysia, which has recently announced that the maximum interest on credit cards cannot exceed 15 per cent, for those who do not default on their repayments in any 12-month period.
The annual fee of $28 for the new card works out to 5.6 per cent of the credit limit of $500. This, I believe, makes it one of the highest fee-to-credit ratios in the world.
.Singapore already has one of the highest debt per capita in the world. Such credit cards may propel the numbers up, as well as increase the proportion of the population with debts.
.Students may end up in debt before they graduate and young adults may be in debt even before they start a family. How many Singaporeans may be in debt at retirement — a time when they should have accumulated sufficient assets instead of a negative net worth?
It remains to be seen how many of the estimated 900,000 Singaporeans aged 18 to 54 who earn below $30,000 may end up in debt.
Not long ago, a pensioner drawing a monthly income would have been denied a credit card.
Now, students and the jobless are being offered one.
As a conservative who has been encouraged all my life to tighten my belt and save for the future, I question the wisdom of issuing a credit card to a jobless person and then hoping that he or his parents will exercise sufficient discipline to keep his spending within affordable limits.
.How will the credit worthiness of the applicant be assessed if he has no job?
I also wonder why this card is needed at all. The people being targeted may already possess an ATM card or a supplementary credit card, which are the safer barriers against overspending.


blueheeler said... that mana ada system....?

Anonymous said...

LSH mentioned that singapore has one of the highest debt per capital, but somehow from the table I found at:

it does not seem high at all. Does anyone know where to get the ranking?

LuckySingaporean said...

anon 8:14pm,

You are looking at the wrong table. Singaporeans have the highest debt per household hanks to housing loans. In 2002 it was 174% of GDP highest in the world...but it kept climbing, I don't have the lastest figures:

2002 Report here:

LuckySingaporean said...

anon 8:14pm

opps link on Singaporeans having highest debt in the world here:

whatsolucky said...

Do you know who is in the pay list of Citibank? He is the Chief Consultant of Citibank and his title is Money-Mind. Make a guess.

Anonymous said...

How come they never ask ex-President Snr Bush to be advisor instead they asked our MM. Shows how respected MM is in the whole wide world! There is no conflict with his role as MM to be their special advisor

-----O L D N E W S--------
Citigroup Inc. today announced that Singapore’s Minister Mentor Lee Kuan Yew has agreed to be its Special Advisor
5 Sep 2006 , New York : Citigroup Inc. today announced that Singapore’s Minister Mentor Lee Kuan Yew has agreed to be its Special Advisor. In this role, Minister Mentor Lee will advise Citigroup on its strategic directions and global business. Minister Mentor Lee will provide counsel to Citigroup’s senior management and its Board on international developments that impact on economies and businesses globally.

Commenting on this appointment, Citigroup’s Chairman and CEO Charles Prince said, “Minister Mentor Lee is a modern-day visionary and a unique statesman who is respected world-wide, and it is a privilege for Citigroup to benefit from his understanding, insights and experience. I am honored that Minister Mentor Lee has chosen to be a special advisor to Citigroup and look forward to having the opportunity to work closely with him as we pursue our international growth strategy.”

Minister Mentor Lee is widely recognized as the architect of modern Singapore having transformed the island state from a small trading port into a city state that takes its place amongst the developed countries of the world. He led Singapore as its first Prime Minister from 1965 to 1990 developing the nation’s constitutional system, governing institutions and the economic and political strategies that have propelled the nation into the international arena. In 1990, Mr. Lee was appointed Senior Minister and in 2004, he became Minister Mentor to the Singapore government.

Citigroup has been in Singapore since 1902. The franchise plays a significant role in the financial infrastructure of Singapore and is involved in every business line and client category in financial services. Singapore is a key centre of excellence in Asia and a strategic hub for Citigroup’s regional management, marketing, operations and technology expertise.

Anonymous said...

without debts(to collect), how do moneylenders make their(tons of) money?

builderofcredit said...

Oh, is it true that Singapore has one of the highest debt per capita in the world?

But whether it's true or not, I still believe that educating the students the right manner of spending through credit cards is the best solution to tone down the increasing rate of credit card debt in the world.

This should not only apply to Singapore but also to all parts of the globe. Consumers should know when to use credit cards or not.