20 March 2011

New Rules on Credit Cards: NO Credit for LOW Credit?

New Measures on Credit Cards had been announced by Bank Negara Malaysia (BNM) to promote prudent financial management and responsible business practices. Summary on the announcement made:
  • For new credit card holders, minimum income eligibility is set at RM24,000 p.a
  • For cardholders earning RM36,000 p.a and less, the following would be applicable:
    • Cardholders can only hold credit cards from a maximum of 2 issuers
      • Affected existing cardholders are given up to the end of 2011 to select their preferred issuers.
      • Cardholders will also be given at least 2 years to service their outstanding credit card debt for the credit cards that have been canceled for the purpose of meeting this requirement.
    • The maximum credit limit extended to a cardholder shall not exceed 2x their monthly income per issuer.
      • For affected existing cardholders, a grace period of 2 years will be given to them to meet with the new requirement.

Example of Credit Cards
How about credit card issuers?
  • Credit card issuers are required to adopt fair, transparent and responsible approach in marketing and offering of credit cards to consumers
  • Can issuers increase cardholders' credit limit without obtaining their consent? NO
  • Can issuers offer a credit advance in the form of cheque payable to cardholders, if they did not request for it? NO

Ease of comparison and making decisions...
  • Issuers to provide a Product Disclosure Sheet that contains key information on the card's features, fees and obligations of the cardholders.
  • Issuers to display prominently alerts to communicate to cardholders the implications of meeting only minimum and partial repayments.
  • Annual statements will be issued at the end of each year, providing information on how long it will take to fully pay off the cardholder's outstanding balance and the total interest costs if only minimum repayment made.

How to make Credit Card Infrastructure more Secure and Safe?
  • Effective 1 January 2012, transaction alerts via Short Messaging Service (SMS) will be implemented after each transactions are performed
  • Effective 1 January 2015, Personal Identification Number (PIN) verification for all card transactions will be implemented
To make our Credit Card safer

Finance Malaysia have a say
The eligibility starts from minimum RM2,000 per month salary is good. We should not give credit to those lower income group as that will only encourage them to spend with credit. But, the maximum credit limit of 2x monthly income is somehow too conservative. In fact, issuers are giving 3x credit limit currently, which is deemed reasonable. 
Problem arise when we purchase a laptop worth RM2,500 for example, and opt for 0% interest repayment scheme. Even though we are capable to repay, but the credit limit balance is reduced by RM2,500 straightaway, and it left very little only.

Understandably, the measures is introduced when Malaysian households debt is considered very high currently. Overall, it is good for the banking systems, and I believe Malaysians welcome the extra security features to be imposed to instill confidence of public on the usage of credit cards.

Source: Bank Negara Malaysia

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