Of Credit Card Limits and Malaysian spending habits

Starting Jan 2012, Bank Negara will impose new rules to credit card usage. This is to manage the debt of credit cardholders earning RM36,000 and below per annum.

Below are the rules:

1. The maximum credit limit extended to a principal card holder in that category cannot exceed twice the holder's monthly income (RM3,000 x 2) per credit card issuer. 
2. They will only be allowed to be a principal card holder from a maximum of two credit card issuers. Combined credit limit will be capped at RM12,000.
3. They have 24 months to repay the outstanding balances on their cancelled credit cards, if they have more than 2 cards.

The rationale of this: Fomca statistics showed that there are 1.92 million credit cardholders in the country who earn an annual income of less than RM36,000 but owing a staggering RM24bil to issuers.

WHY?
Apparently, people overspend in an increasingly materialistic society. Most advertising was aimed at promoting high-end lifestyles and this created pressure on young people to buy things just so they would appear “cool” or “trendy".

Here are the excerpts from TheStar

Fomca chief executive officer Datuk Paul Selvarajj said Fomca had recently conducted a national survey on young workers' financial behaviour and habits. Preliminary findings revealed that more than 60% were in debt, totalling about 15% of their income.

Here are what he emphasized:

• Proper financial education was important to address the debt problem.
• Financial education should be made mandatory at every level.
• People need to have the right skills, knowledge and attitude to help them manage their finances.
• They need to start thinking about saving for the future.

Psychologist and Dean of the Faculty of Behavioural Sciences at HELP University College, Dr Goh Chee Leong said people associated owning material goods with happiness and this was a major reason why they did not live within their means.

His quotes:

“Many young working adults nowadays are afraid to be seen as falling behind with trends. They end up buying things they don't want just to conform.”

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