Last week, MAS released estimates that about 3 per cent of unsecured credit borrowers have accumulated unsecured debts that exceed their annual incomes. Although it did not give absolute numbers, there are more than 1.4 million credit card-holders as of 2013, so the 3 per cent could mean some 42,000 people.
Our writer shares her thoughts about living in a credit card generation.
I wish I could say I’m apart from the credit card generation, instead of a part of it, but that would be a lie. Despite mentioning in a previous article that Singaporean women know how to drive a bargain, it’s no denying that the advent of credit cards have made it easier for us to spend.
It has to be said that the convenience of cards works both ways: it’s easier to pay for your purchases, but it’s easier for you to spend without thinking. Another thing about card payment is that because you don’t see the cash leaving your wallet, it’s easy to forget how much you spent.
While I’m too wary to sign up for a credit card after hearing so many cases of snowballing interest, I do own a couple of debit cards. Even without credit cards, my easy access to my bank accounts enables me to swipe without thinking.
I first got a debit card when I was 16-years old, after many arguments with my mother, who sagely predicted that I would end up bankrupting myself over whimsical purchases. While I’ve managed to have enough money left in my bank after a few years of swiping sprees (in my own defence, I normally only shop when there’s a huge sale), I can’t help but wonder how much more money will be sitting in my account if I took my mom’s advice and just stuck to a bank card instead of a debit.
For someone on the cusp of university education – especially if you’re going to do an overseas degree like me – every extra bit of cash count. After all, we’re hardly at the age where we can unabashedly accept pocket money from our parents, and we’re expected to repay them for our university tuition fees. In my case, that could run up to S$100,000 or more.
I’ve got friends who ran up accumulated interest and had to sporadically borrow money from others just to pay their bills in order not to have their interest snowball. After all, credit cards enable them to spend money they haven’t already had. The saying “Don’t count your chickens before they hatch” is particularly apt here.
Savings are practically unheard of these days, and even for the rare few who do have the discipline not to swipe their card to their heart’s content, these savings generally crawl at a snail’s pace. After all, with everything electronic these days, shopping and paying can be done in just three clicks – PayPal.
I must say that PayPal is the best and worst decision I’ve ever made regarding my finances. Linked to all of my cards, I think the amount of money I spent online shopping has doubled since I signed up for it. While it makes little difference, having to physically type in my card details before every purchase gives me enough time to reconsider and evaluate if I absolutely need to buy this item. With PayPal, all I needed to do was to sign in, click pay, and I’m done.
Still, that’s not to say it’s entirely PayPal’s fault, or the banks issuing the credit cards. I think it’s merely a changing situation, where every one of our peers has these fancy and sometimes customised cards. We’re on the edge of adulthood, and a credit card is almost the epitome of being an adult. After all, it takes a certain about of responsibility to hold onto a card, although this responsibility isn’t always in practice. It sure doesn’t help that retailers sometimes run promotions for certain cards with a minimum purchase (often above what we intended to spend in the first place), making it attractive and ludicrous for us to spend more.
It would be unfair to lay the blame solely on credit card issuers, because after all they only provide convenience and incentives that makes it easier to spend money. Some of the blame should also be put on our shoulders, because after all we are the ones who ultimately decide whether or not to spend the money.