Monday, March 28, 2011

Rescind RM50 Credit Card Tax!

We call for the removal of the RM50 credit card tax since it has not only failed to reduce credit card debt as intended, but instead have added to the misery of debtors

The latest Bank Negara Malaysia (BNM) report on the country credit card debt proves that the Government’s introduction of a RM50 tax for every principal card holder and a RM25 tax on a supplementary card holder has failed to reduce the population’s credit card debt in January 2010.

As shown in the statistics given by BNM (table below), after the introduction of the credit card tax, the number of credit cards in circulation has dropped by 19.4% from 10.8 million in December 2009 to 8.7 million in October 2010. The amount of credit extended has also reduced marginally from RM115.9 billion to RM113.8 billion over the same period.



However, despite the respective reductions in number of cards and the amount of credit extended, the current outstanding balance has increased by 10.4% from RM24.3 billion to RM26.8 billion. Worse, the outstanding balances which are more than 6 months overdue have increased by 12.9% from RM62.1 million to RM70.1 million.

When the 2010 Budget was debated in Parliament at the end of 2009, I had appealed to the Finance Ministry to reconsider the proposal to impose the credit card tax on cardholders as it will be completely ineffective in the Government’s battle to reduce credit card debt. Instead, all it will do is to add to the burden of those who are already laden with debt.

In addition, the introduction of the credit card tax will also result in value-destruction as financial institutions have spent tens of millions, if not more, to build their customer base. As a result of the tax, it is the cardholders who are not indebted that was able to terminate their cards, and this is proven with the statistics above, showing a steep decline in cardholders, but not the outstanding debt.

However my arguments in Parliament were dismissed by the Deputy Finance Minister then, Datuk Chor Chee Hueng.

What the Government should do instead is to introduce new measures to ensure that only those who are able to manage their finances are qualified to apply for credit cards. For example, the move to increase the minimum income level from RM1,800 per month to RM2,400 is a good start to reduce credit card delinquencies. In addition, BNM should set strict guidelines to banks to ensure that credit limits should not be easily increased for cardholders who are not disciplined in debt repayments. Measures could also be introduced to penalise banks for granting excessive credit limits to those who are not financially able to ensure that such abuse are kept to the minimum.

With this set of information proving that the RM50 tax is completely ineffective in the Government’s battle against credit card debt, we call upon the Finance Ministry to immediately reverse the tax in order to not add further to the burden on cardholders who are already in debt, and paying high interest rates for their outstanding balances. In addition, the removal of the tax will enable the financial institutions in the country to compete more freely in the provision of credit card services to those who are facing no difficulties in managing their personal finances.

9 comments:

amazed said...

Yes. Thought it was a dumb idea from the start.

This is the situation when policy makers lacks wisdom. Rakyat have to bear the adverse consequences and pay the price, while they learn at no cost to them.

One must not think that bad governmental policies do not cost you. They do, in the long run and are not visible immediately.

CONSUMER said...

This credit card is a good bussiness for the banks because on top of the 1.5-2% fee charged on the merchants,they also charge very high interest(from13.5 to 18%p.a)on card users who choose to pay the minimum 5% repayment.
So when the bank increase user credit limit,they are encouraging you to spend more and the more they earned on the merchant fees and interest from card user.
One way to reduce outstanding debt,other than limiting the credit limit,is to increase the minimum payment to atleast 10%.
What say you,Bank Negara?

Anonymous said...

The best part, they applied the tax before being discussed and known by the public. I suggest, tax only people with 2 or 3 or more cards.

Anonymous said...

Tony,

We all know full well from the start the reason for imposing that MYR 50 tax. It's to satisfy the government's big, fat, disgusting insatiable greed for all things wealthy and luxurious.

The same goes for so many aspects coming from the government.Removal of fuel subsidies? Imposing GSTs... Do we all think the money saved is for the good of the public? A firm no is in the cards I believe.

BRING ON GE 13 you piece of S*** of a prime minister!

Even if we fail to bring your government down, we will at least put up with a good fight.

Nat--

Anonymous said...

aother story is govt tax in astro bill.. cellphone bill.. the tax is anywhere and for every people... do the govt think tats everybody is rich so we(govt) must take some money from them..

Anonymous said...

Usual dumb ideas by dumber politicians who think it's so smart of them to suggest a handiplast for gangrene.

Chong Kong Hui said...

Umnoputra need to juice more cash from poor people with the name of "help people to manage credit card". It is proven COUNTER EFFECTIVE within 1 year.

It also tells that Malaysian have A REAL PURCHASING POWER problem, have less money to spend and therefore borrow via credit card.

At the end, who win? Government (Umnoputra) and Banks.

Who lose? You, me and Rakyat.

Malayan Tig3r said...

I never carry credit card debt nor overspent. Why am I being penalised with the RM50 tax ? Stupid bloody government. Government's coffer must be fast dying up that's why all this sandiwara to squeeze extra pennies from rakyat. For no apparent reason, I'm force to pay RM100 for 2 credit cards I owned , why do I need 2 instead of 1 , the minister may ask ? Moron , will you travel with your car without an extra spare tyre? Same rule apply laa. And another way they bloodsuckers are squeezing our money is from Saman Ekor. Simply put up your vehicle number on the summon database dated some dunno how many donkey years ago and force you to pay. No photgraph , no hardcopy summon , you just need to pay. What farking rationale here?
Come on YB , please fight these morons.

Anonymous said...

instead of cancelling the credit cards because of the RM50 I am thinking of cancelling the govt in the next election.