28 October 2009

Budget 2010: Credit Card

Credit Card - Life of Banks

The most talk-about topic of the boring 2010 Budget is the Credit Card's Service Tax. Rm50 for principal and Rm25 for every Supplemental card. I believe almost every qualified person on the street owned at least one card. And, many of us own more than what our purse can accommodate.

If this new policy is to be inforced starting next year, what's the impact?
  1. Banks: CC is a new income source for banks. If we took the interest off the picture, I think it's fair enough that CC makes consumers more convenient, and banks charge merchants for using their credit service. For those banks which are promoting their CC heavily sure would suffer a massive blow. NO new card application + Card cancellation = Problems
  2. Cardholders: For sure, actions will be taken to cancel as many cards as possible. Unused cards sure not a problem, but how about those with installments? Congrats, you are forced to continue and pay Rm50 extra. How about those who still have CC debts and can't afford to settle it fully? Congrats again, you are forced to have more debts every year.
  3. CC sales person: For every new cards cancellation within 6 months, commissions will be crawled back by issuing banks. Busy calculating now?

Government said this is a Rakyat-Friendly Budget, and I'm not surprise, since this service tax is successfully link with almost all of the Rakyat (But, it's not Friendly either). The objective given by government is to discourage citizen to ride the CC debts, which can leads to bankruptcy. However, these kind of policy would worsen the situation only by adding Rm50 more debts for each card.

So, should this be implemented? And, how should it be implemented?

YES, to induce a better CC culture, we should implement it. However, we should be fair to those who are using credit cards correctly. Example, Rm50 should only charged on the 3rd cards onwards instead. I think 2 cards per person is reasonable. Or, we can raised the card's application requirements and stringent the approval process. In other words, lending money to affordable cardholders only.

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