5-O Agency : Together We Share, We Learn

~ New credit card rules out today

Posted by faisalrenzo on March 19, 2011

Industry insiders say the new measures could include capping or reducing credit limits and limiting the number of cards for those in the lower income group

Bank Negara Malaysia will today announce new credit card guidelines to address concerns over rising household debt.

Industry insiders said the new measures could include capping or reducing credit limits and limiting the number of cards for those in the lower income group.

Currently, banks are free to set credit limits, based on their risk management practices. The new guidelines are expected to cover existing and new credit card users.

“The new enhanced credit card guidelines is to lower the risk associated with the lower income group,” said an executive at a local bank.

The new measures come as previous moves did not have the desired effect. During Budget 2010, the government fixed a RM50 charge on each credit card held. “The regulators’ objective is to instill better financial management on consumers,” he added.

Economists are concerned with growing household debt levels, given the anticipated lower economic growth this year and rising inflation.

This would hit loan repayment when real disposable income starts to shrink. The average monthly income of Malaysian households ranges from RM3,000 to RM4,000.

Household borrowings as at end-November 2010 stood at 74.5 per cent of the gross domestic product, the second highest in Asia, except Japan.

Total household borrowings also grew at an average annual rate of 9.5 per cent to RM561.5 billion as at end-August 2010 over the past four years.

It was reported that the ratio of household debt to personal disposable income in Malaysia reached 140.4 per cent in 2009, which was higher than Singapore’s 105.3 per cent and the United States’ 123.3 per cent.

This indicates that Malaysians have been over-borrowing, where they owe more than what they earn.

A credit card holder should always have in mind that having a credit card is a major responsibility. If they don’t use it carefully, these may owe more than they afford to pay. It can also damage their credit ratings with CCRIS, and create credit problems that are quite difficult to repair.


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