The Singapore economy is returning to great shape, and this could be good news for credit card users.
After the alarm a couple of years ago that many Singapore households were borrowing more than 150% of their annual income, our country’s Monetary Authority of Singapore acted quickly, assuring that the local banking system was perfectly sound.
While a small proportion of households were borrowing too much, MAS argued, the vast majority were subject to loans and credit which were perfectly affordable. The vast majority of this debt burden is on property loans, so MAS applied a new framework to help people mitigate the risk of over-borrowing and defaulting.
As far as credit cards go, the huge majority of Singapore card holders use them responsibly. The 0.2% default rate is impressively low, and MAS has put steps in place to make sure that it stays that way. We’ve spoken about these steps in previous months, and the initial signs are that they are not inconveniencing the average man on the street in any way at all.
All new applications must fill certain financial criteria that protects both the user and the bank – a minimum income of $30,000 before qualifying for a card for most people, with a credit limit not exceeding four months’ income. As far as the maximum lending goes, most card holders fall well within these limits already. Furthermore – and we’ll say this until Hell freezes over – if you’re not paying off your entire debt every month, then you are using your credit card as a loan, and therefore using it incorrectly. If you want a loan, go to your bank and ask for a loan. It’s cheaper!
What the news rules are intended to do is to make the average citizen more responsible for their own personal finances. The limits are their for your own good, but it’s down to your own discipline to ensure that spending doesn’t get out of control. As far as credit cards go, MAS wants to make sure that people aren’t drawn into a cycle of spending when they choose a new card. We echo this lofty ambition – credit cards are useful financial tools in the right hands, and carefully chosen cards with a low level of (or zero) personal debt is the proper way to use them.
With the economy on a sound footing, there’s never been a better time to choose the right credit card.
Article by Jason Taylor – [email protected]