CREDIT CARDHOLDERS (Amount utilised)

Mr Heng Chiang Meng asked the Minister for Finance if he will give the number of credit cardholders and the dollar amount of credit utilised via credit cards for the years 1988, 1989 and 1990.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, the total number of credit cards, both main cards and supplementary cards, issued in Singapore was 318,966 in 1988, 449,762 in 1989 and 609,706 in 1990. The actual number of cardholders may be smaller because each cardholder may be holding multiple cards. As for chargecards, the total number of cards issued, both main cards and supplementary cards, was 161,716 in 1988, 181,975 in 1989 and 201,002 in 1990.

The total rolled over balances of credit cardholders were $14.6 million, $135.1 million and $207.2 million at the end of 1988, 1989 and 1990 respectively. The rolled over balances refer to the minimum sum which is not settled by credit cardholders by due date as well as the balance that is rolled over after settlement of the minimum sum. The total balances exclude late payments of charge cardholders who are required to pay the amounts charged to their cards by due date. The low balance at the end of 1988 was because it excluded the rolled over balances of less than one month. The information on the latter was available only from 1989 when the Monthly Statement on Credit Card Transactions was revised.

Mr Heng Chiang Meng (Cheng San GRC): Sir, the figures show an increasing trend. I would like to ask whether the Minister will consider taking steps to deter, prohibit or to regulate the increasing amount of credit extension by these card issuing companies since (a) such credit extension would be illegal under certain circumstances given a recent legal ruling; and (b) at the high interest rates charged, there is a strong implication that such credits arebeing used by those not able to obtain loans at lower cost and, by implication, are those least able to afford such high cost of borrowing or living on borrowed money.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, the very rapid rise of credit cards and chargecards issued in recent years is a matter of some concern to the regulatory authority, the MAS. The MAS is in the process of reviewing the whole activity. However, I should point out that it is not the Government's duty to determine how the Singapore consumer should spend his money, although we would advocate against pursuing the syndrome of spend now and pay later.

However, what is of concern to the authorities is that one of the consequences of the rapid proliferation of credit cards is that it would lead eventually to excessive credit creation by individuals who hold one or more cards and therefore multiply their credit extension. Multiple cards mean that for each card you will have a credit limit multiplied by X number of cards which you have. This could eventually lead to defaulting or write-off on bad debts. Also the experience elsewhere, particularly in the United Sates, has led us to believe that excessive proliferation of credit cards could eventually lead to fraud. So some degree of regulation might be necessary and the whole issue is being reviewed, bearing in mind that the last time the regulations were set was in 1983, at which time the credit threshold was for people with $2,000 a month and above and the age requirement was not less than 21 years.

Mr Heng Chiang Meng: Sir, may I ask the Minister whether he meant that the Government is concerned about fraud in credit expansion in Singapore, but not concerned about the social implications of those least able to afford credit to have such credit extension available to them.

Dr Richard Hu Tsu Tau: The issue of the least able to pay is determined by the income limits which are imposed, and this is an issue which we are now looking at. I did overlook the question which Mr Heng Chiang Meng raised, which is the high interest rate charged. I do not consider that necessarily as a bad thing, because high interest rate would automatically restrict the amount of credit taken on the cards. On the credit cards, the cardholder is required to pay a minimum sum every month and interest is charged on the outstanding balance. If the card company were to charge a very low rate of interest on outstanding balances, I would suggest that it would in fact increase the tendency to use more credit on the cards.

Mr Heng Chiang Meng: Sir, with your indulgence, may I ask another question? I think the Minister misunderstood me. My point about high interest rates charged is to show the Minister that those who have to use credit card extension or credit have not been able to borrow funds at lower interest rates and these are normally the people least creditworthy to borrow funds at lower rates and therefore least able to afford the cost of living on borrowed money.

Mr Speaker: You have made your point, Mr Heng, but what is your question?

Mr Heng Chiang Meng: My point is: is the Government not concerned about the social implications, rather than just the fraud and the credit expansion?

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, yes, of course, the Government is concerned about the social implications. As I said earlier, it is not the Government's job to determine how the consumer should spend his money. However, we would in fact advise all Singaporeans not to spend excessively on credit, but the control has to be a personal issue.

The regulator's problem is to ensure that credit is not excessively given and against conditions which would lead to excessive credit creation and ultimately leading to defaults and frauds. As I mentioned earlier, these issues are being looked at by MAS.

Dr Lee Siew-Choh: Sir, will the Minister ask the MAS in its review to inform the public how much debt is incurred by the people in Singapore or the credit that is being given to them, every year, or maybe twice a year?

Dr Richard Hu Tsu Tau: The total amount of outstanding credit on credit cards is about $2.7 billion currently. The rate of default so far is not unduly worrying, although it is rising. It amounts to about $11 million write-off per year by the credit card companies, accounting for about 0.4% of total credit extended. Com- pared to this, the situation is much more worrying in the United States where bad debt write-offs can amount to something between 4% and 5% of credit extensions.