This is a global phenomenon as individuals become mired in debt, mostly from credit cards, for a lot of reasons. In the UAE, banks are seeing up to 2,500 customers leave the country each month without paying off their credit card bills.
Earlier this month, President Barack Obama signed a new credit card Bill, aimed at better protecting customers, and cracking down on abusive lending.
The law brings some new provisions to protect consumers from confusing fine print and unfair practices like a compulsory 45 day notice to customers before any changes in interest rates, and restrictions on fees and rates.
CREDIT CARD DEBT AND YOU: Under-30s under siege
“Out of the 3,548 people declaring bankruptcy by credit card, 1,774 belong to those aged 30 and below,” said Datuk Abdul Karim Abdul Jalil, director-general of the Department of Insolvency Malaysia. That works out to a staggering 50 per cent.
There are a number of reasons for the phenomenon but no serious study of the matter has yet been conducted , said Abdul Karim.
He added that applying for a credit card is easier these days. There are instances where you do not need to submit your pay slip to apply for one.
With credit cards easily obtained, it’s important that the right people should be the ones who are eligible for them. These cards should be made applicable to those who have the capability to pay.
Besides that, the public should also be educated on how to better manage credit finances so as not to end up in debt, Abdul Karim said.
“We’ve already witnessed what the credit crunch has done to a country as powerful as America. We should take precautions to make sure the same thing does not happen to Malaysia.
“It is often said that money is the root of evil, but now, we can also easily say that enjoying the luxury of credit is the root of bankruptcy.”
RM24b not small money
IS RM24.4 billion big money? This is the amount of credit card debt owed by Malaysians, according to Bank Negara Malaysia’s statistics as at end of March 2009, reported by Bernama last week.
The report, however, stated that the credit card debt in the country has not yet reached a critical level, according to the Credit Counselling and Debt Management Agency (AKPK). This is because up to that period, loans via credit card accounted for only 6.1 per cent of the total financing by banking institutions.
However, Malay Mail took a closer look at how much RM24.4 billion is worth by looking at the country’s 2009 budget allocation, and we find that RM24.4 billion is certainly worth “something”.
The budget allocation for 2009 stood at RM207.9 billion. Out of this amount, RM7.6 billion was allocated for transport, RM3.2 billion for public utilities, RM17.8 billion for social services (including education and health), RM7.3 billion for pensions and gratuities, RM4.1 billion for security, RM33.8 billion on subsidies, RM 27.7 billion on economic services and RM13.5 billion for debt service charges.
So, in comparison, it is quite evident that the RM24.4 billion is not an insignificant amount.