Question Q329: To ask the Senior Minister in light of the relaxation of minimum annual income for credit card applicants and certain local banks launching or intending to launch credit cards where no minimum annual income is required, what measures will the Monetary Authority of Singapore implement to ensure that the applicants of these credit cards, particularly those who have not even started working, will not be burdened with insurmountable debts.
Mr Lim Hng Kiang, Minister for Trade & Industry, Deputy Chairman, Monetary Authority of Singapore:
Mr Palmer asked about the relaxation in the minimum annual income for credit card applicants, and about the launch of payment instruments with a credit limit of not more than $500 without a minimum income requirement.
First, let me clarify that the minimum annual income requirement to qualify for a credit card has not been relaxed, and remains at $30,000. There are no plans to change this. When Mr Palmer mentioned the relaxation in the minimum annual income for credit cards, I presume he was referring directly to payment instruments with a maximum credit limit of $500.
MAS has exempted payment instruments with a credit limit of less than $500 from MAS' rules to provide some leeway to the market to innovate and develop convenient payment instruments. For example, there have been initiatives in Europe to develop systems for processing payment for small-ticket items using handphones. Whether it is cards or other instruments used for payment for goods or services, MAS has set the maximum credit limit at $500. This allows flexibility in payments for small-ticket items without raising substantial concerns about Singaporeans spending beyond their means.
Mr Palmer expressed concern about cards targeted at students aged 18 and above. I agree with his view that card issuers should be responsible when targeting at students. We note that some industry practices include requiring parental consent when issuing cards to individuals aged below 21 years, suspending the card once there is a missed payment as well as contributing customer credit data to the credit bureau. These practices, together with the modest credit limit of $500, will help avoid situations where young cardholders take on unsustainably high debt. As more industry players offer $500 payment instruments, we would encourage the industry to come up with a common Code of Conduct to bolster responsible lending practices in this segment.
To help young Singaporeans acquire the skills and knowledge to better manage their finances, we have been working through MoneySENSE, the national financial education programme, with schools to teach youths basic money management skills. Ultimately Singaporeans have to take personal responsiblity for their finances, and ensure that they do not incur excessive debt.