Saturday, July 11, 2009

Why am I 'forced' to apply for every credit card under the Sun?!!!

The other day I was at a restaurant and when I asked for the bill, the waiter asked me if I had a UOB credit card because there was a 20% discount for holders of the card. I didn't and paid 20% above what a person with a UOB credit card would have to pay. 2 weeks ago, I went to Prima Deli to buy a birthday cake and was asked by the cashier if I had a HSBC credit card because Prima Deli has a 10% discount for holders of HSBC cards. I didn't have a HSBC card so I paid 10% more for my cake. Seng Siong now ties up with Diner's Club to give a 5% discount to its members. Carrefour gives a 5% discount to holders of POSB's Everyday Credit Card. There countless other restaurants, hotels, shops big and small with tie-ups that penalises people who don't have a certain credit card. It is okay if there are real choices on where you can shop but sometimes that Prima Deli is the only cake shop within 2 km of your're inconvenienced and penalised unless you apply for all these credit cards. It is so damn ridiculous!

While it does not make sense to stop these tie-ups directly, the reasonfor issuers to tie-up with businesses is the profitability of credit card business without the right regulation and the high profitability motivates issuers expand market share aggressively.

Why did our useless Consumer Association and authorities allow this to happen. Many of you will say it is the same in other countries. Come on we allow these practices simply because other countries allow them?? Our regulators don't have brains to figure out whether it is good for our society and citizens before allowing banks to issue credit cards with the current set of regulation. After all the problems caused by the of credit cards in a number of countries, our govt still don't have the common sense to do things differently - why did we pay them so much to copy bad ideas from other countries.

What has happened is the aggressive promotion of credit cards has caused the rollover credit card debt in Singapore to balloon to $3.6B. This debt that earns 24% interest is highly profitable for the banks but hurts our society. Banks make $864M every year from this - enough to provide every kidney patient with free dialysis + nursing home for the homeless old folks + medical care for every uninsured person in Singapore + free education for every poor student. This is parasitic banking. You may laugh at Malaysia for being backwards in many areas but when the govt detected this problem a few years back, it quickly implemented a cap limiting the credit card interest rate at 13%.
Many countries have realised that the banks need to be rein in before they harm the society further. Less than a month ago, US President Barack Obama signed sweeping credit card reforms into law to shield American credit card holders from predatory fees, among others[Link]. With mounting credit card debts and a tough climate, could now be a good time for Singapore to consider similar reforms. However, as always, it is difficult for our authorities to do the right thing because interests of the PAP govt is now diversified beyond what is good for ordinary Singapore. We need the equivalent of Harvard Professor Elizabeth Warren. She has risen to prominence for her research on the practices of banks and how their lending activities can harm a society if not properly regulated. I read her work a few years ago before the current crisis took place and she has been right on so many things - she is now on several oversight committees looking at new regulation for the banking industry. Here she is talking about reforms needed for the credit card industry - there are many lessons here for our regulators. The same regulators who failed to protect investors from mis-marketing of structured products and has now allowed these credit cards companies to proliferate their bad practices.

I have one credit card and use it mainly for overseas assignments because many hotels don't accept cash payment. Now the banks are allowed through tie-ups to penalise me for not applying for their credit cards and be one of their customers. This to me is so ridiculous.


WL said...

It seems that the MAS rank the interests of the banks higher than the public. The gap between deposit and lending rates is one clear example.

Anonymous said...

Lucky, once again thank you for updating us on what's happening.

What this phenomenon is showing is the US banking/credit card industry has moved very quickly its battlefield beyond the US. It has not stood down on its bad and societally-destructive practice of usury.

It just goes to show the money masters at work ; it is a diabolical work of a group of high-level miscreants with a long history, working closely with political and financial top dogs wherever they manage to wriggle in.

They are conmen in high position in the financial world, dressed in such attire and with airs that people will tend to respect than treat as doubtful characters.

Obama is treating the disease at home but here US bankers have very quickly tied up with local banks to do a killing. When Singapore wakes up to the same mess as the US, why these banks have already made their bucks and credit card companies will have move to another territory.

PAP is working hand in hand with these credit card companies, now we can see very clearly. I won't be surprised they have given PAP some benefits like putting PAP ministers in highly paid positions as a top advisers in their companies just like Lee Kuan Yew was its adviser in Citigroup a year or two before its collapse.

This is a blatant conflict of interests. No wonder LKY decided to give US$30 billions to Citibank and the others in bailing them out.

If LKY did'nt approve that, alamak what will happen to his position and $millions salary from Citicorp man. You must think for him lah.

Obama is dealing with cunning usurers who had been in this business for centuries. He can mop them up in the US, I pray he does but how is he gonna control them abroad with governments like PAP which has nothing in its mind but profit for themselves, never mind it will do the people in for good.

Why are Singaporeans so easily taken in just because they earn a bit more?

Don't they know what caused the economic problem of the US?

If anyone from Obama administration happen to read this, I request Obama to take his policies in reining credit companies to the international level. The net must be cast wide to fix up these miscreants and politicians in cahoots.

Anonymous said...

I have a number of credit cards, and am glad that I pay significantly less when watching movies or eating at certain restaurants.

I also have been late before in paying up my credit card bills. Guess what? I never paid a late penalty before. I call up the credit card company, demand that they waive off the penalty. If they refuse, I simply tell them that I will pay up, but at the same time, will cancel my card once my outstanding bills are settled.

I think people need to learn how to manage their finances. If they are too idiotic to learn not to overspend, then they certainly deserve to go bankrupt and be crushed under the weight of their credit card debts.

LuckySingaporean said...

anon 5:22,

Banks are not exploiting you when you;re in control. What they are aim for are people who become vulnerable or careless. Our society is not special that we can reduce the significant number that these banks can exploit. When do people lose control, when they suddenly lose their jobs and become dependent on this form of debt, sudden illness or accident etc.

That is why loan sharking is banned. You can always say that you benefit from temporary loans from from loan sharks by paying back within a week but there will be those who will get into trouble.

All we need to strike the right balance is to have good regulation. What did Malaysia lose by imposing a interest rate cap? Nothing! ...Credit card companies still happily set up business there and Malaysian can still get credit cards. What they avoid is predatory lending that harms the people.

Anonymous said...

Be creative (think out of the box) and you may get a discount.

Once I was with a large group of friends for dinner. When it came to the bill, none of us had the card that qualify for 30% discount.

So we asked a guy at the next table. He had the card and agreed to settle the bill for us and we paid him the cash!

We got a big discount on a big bill and he got lots of card points! Win win.

Anonymous said...

high debt = high money supply = high inflation.

not really related to unsecured credit, but I suspect the high inflation during the past few boom years are due to excessive lending to property developers and property flippers.

this's related to one of your previous posts on fractional reserve banking.

Anonymous said...

The biggest irony of these tie-ups card discounts is the people who don't qualify for any credit cards, such as the jobless and low income individuals, are the one who need the discounts but end up paying the full amount.

Even clinics has tie up with credit card company to offer discount to card holders. So the relatively better off people are paying less than low income/jobless people.

Anonymous said...

Actually credit cards are not the problems, self-control is.

I have 5 credit cards because sometimes they offer good deals but I only use one mainly for grocery shopping and paying electricity/heating since I have to spend the money anyway but I get 2% cash back under their rewards.

The other credit cards are chucked in a filing cabinet somewhere.

Anonymous said...

The whole banking system is corrupted according to the research done by this author...make sense when I read in details

Anonymous said...

Credit itself is not necessarily bad. After all most businesses buy their goods on credit, without which much of our economic activity would be hampered.

For sizable businesses like retail chains, cash flow created via credit terms extended by suppliers can be very substantial.

So what is at fault is not credit per se but whether for individuals the promotion of credit is necessary or is it something contrived by the banks to earn high profit?

The wide use of credit cards have resulted in a heavily debt-ridden society in the US.

Although the default rate for credit cards in Singapore is not worrying now, in time to come the habit of spending on credit will catch on in a big way as people begin to think that it is okay to do that.

Is this what PAP wants? It looks like it for PAP cannot be unaware of the danger. May be PAP has lost too much in its investments, it is trying to make up through such means via DBS.

Taishan said...

Lucky, 13% is when you have no rollover for last 12 months. Else it's still standard 18%.
16.5 % is the other rate with some condition or other.
All the discounts comes at a price - late penalty is hefty.
The banks are a smaller version of the legalised "ah longs" in Sing.

Chee Wai Lee said...

This is an informative documentary about the credit card industry in the US, produced by PBS (Public Broadcasting Service) and available online (they have a very wide range of professional documentaries available online in their "Frontline" series, which is more than I can say for Mediacorp).

Title: Secret History of the Credit Card.

The lady on Lucky's video link shows up a good number of times on this documentary.

Anonymous said...

they could have counter argued that no, you're not paying anymore than you should w/o the (insert bank) credit bank. what you're paying for is the market price. fair and square.

the X% discount is a reward/incentive for holders of (insert bank) credit cards that's all.

Parka said...

Not having that 10% off at a restaurant is not a penalty, it's a lack of perk. I would gladly pay the official price than get a credit card just for that, or not eat at that restaurant at all.

There's no force here. Consumers can just walk away.

Anonymous said...

HSBC had raised their late payment fee to $50,

so where got recession?