CREDIT AND CHARGE CARD ISSUERS (Free gifts and special promotions)

Assoc. Prof. Walter Woon asked the Minister for Finance whether it is the Government's policy to prohibit credit and charge card issuers from rewarding cardholders who consistently use the card with free gifts and special promotions.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, card issuers are not totally prohibited from offering gifts and other incentives to its cardholders. Under guidelines issued by the Monetary Authority of Singapore, card issuers are only advised not to offer free gifts and incentives which are tied to or directly linked to the level of spending by cardholders. Any such schemes introduced before the guidelines were introduced may continue to operate until they expire.

Other forms of incentives and promotions which are not dependent on or related to card spending levels, including free gifts, waivers of fees and programmes entirely sponsored by merchants continue to be allowed.

The guidelines discouraging the use of spending linked promotional programmes were issued in October last year, after discussions with card issuers. The aim was to discourage the offer of rewards to entice card holders to spend excessively and beyond their means in order to qualify for the incentives. Furthermore, stiff competition in the credit card business had led to concerns amongst some card issuers that the use of increasingly costly incentive schemes will ultimately have to be passed on to cardholders.

Government supports the healthy growth of the credit and charge card business as it contributes towards the creation of a cashless society. It does not condone, however, the use of aggressive inducements which lead to excessive credit creation, debt accumulation and, ultimately, loan losses.