Finally, I see some initiatives taken by Bank Negara Malaysia (BNM) to address credit card debt in Malaysia and rein in the commercial banks which have contributed much to cardholders’ financial misery! But personally, I feel that the steps are still too little to make much impact
It was announced today that with immediate effect, BNM has raised the minimum income requirement for credit card eligibility from RM18,000 to RM24,000 per annum. (My take on this: RM24,000 is still too low. As a fresh graduate entering the job market typically earns about RM2,000 monthly, this limit is still as good as plunging the person into debt immediately. Some people may disagree with me by saying that carrying a small debt is normal but my question is: why be in debt at all?)
Other steps taken by Malaysia’s central bank included:
- Restricting applicants of credit cards and existing cardholders who earn RM36,000 per annum to a maximum of two card issuers. Cardholders with more than two credit cards have until the end of the year to select their preferred issuers.
- Capping the maximum credit limit to twice the monthly income of the cardholder per issuer for those earning less than RM36,000 per annum. Previously, the credit limit was set at the bank’s discretion.
These measures were announced by BNM’s deputy governor, Nor Shamsiah Mohd Yunus. “It’s a preemptive move to ensure that the prudent level of household debt remains at a manageable level. We want to promote sound financial and debt management.”
She revealed that outstanding credit card debt stood at RM30.8 billion as at the end of 2010, which was five percent of total household debt, and the number of cardholders who declared bankruptcy last year was 622, or 3.4 percent of total individuals who declared bankrupt in 2010. Half of the 3.2 million cardholders in the country earn below RM36,000 a year, while fewer than three in 10 persons have cards from more than two issuers.
For these cardholders who have more than two credit cards, Nor Shamsiah said that they would be given at least two years to service the outstanding debt for a credit card cancelled due to the new requirements.
“Card issuers will engage with the affected cardholders to assist them in restructuring their repayments to facilitate smooth implementation of this measure. Cardholders can also seek the assistance of the Credit Counselling and Debt Management Agency (AKPK) for advice on their debt management,” she added.