Question No. 169
 Notice Paper No. 26 of 2011
 Question No. 162
 Notice Paper No. 21 of 2011
For Written Answer

Date: For Parliament Sitting on 14 February 2011

Name and Constituency of Member of Parliament
Mr Christopher de Souza, Member of Parliament, Holland-Bukit Timah GRC

Question No. 169

To ask the Senior Minister (a) how our credit card rollover debt compare against those of developed countries; (b) if there is any age group or population segment which incurs significantly higher rollover debt; and (c) how will it be ensured that credit is not too easily extended by way of credit cards such that personal debt becomes a serious problem.

Name and Constituency of Member of Parliament
Mdm Ho Geok Choo, Member of Parliament, West Coast GRC

Question No. 162
To ask the Senior Minister (a) apart from MoneySense publications, what other forms of public education are available to credit card holders, especially the young and newly employed; (b) over the last 10 years, what is the number of credit card holders who have been declared bankrupt due to their inability to pay their dues; and (c) what form of vigilance does the MAS exercise to ensure that the number of credit card defaulters is minimised.

Response

1   The rollover ratio¹ was 15.5% in 2010, after dipping to a historical low of 14.5% in 2008. This is less than the 5-year average of 17% between 2004 and 2008 and below the 20-25% range recorded during the peak period between 1999 and 2003.  Although international data are not directly comparable, our rollover balances as a percentage of total balances appear lower than those of Australia and the UK.  Nonetheless, credit card default rates², which are leading indicators of bankruptcy numbers³, have remained low. Default rates fell from 0.23% to 0.19% between 2004 and 2010.

2   Data from Credit Bureau Singapore show that the share of “revolvers”⁴ has remained broadly stable.  However, the share of “frequent revolvers”⁵ has risen slightly in recent months. Young adults aged 21-29 have contributed to this increase. As of November 2010, they represent 39% of new credit cardholders⁶ who are frequent revolvers. Young adults also account for a rising share of credit card defaulters, increasing from 9.4% or 123 defaulters in January 2008 to 13.4% or 233 defaulters in November 2010. This bears close monitoring.

3   MoneySENSE has been working with the Association of Banks in Singapore (ABS) to conduct a series of talks on understanding different types of loans, including credit card loans, and avoiding the debt trap. These talks have been delivered to students at tertiary institutions and young working adults at their workplaces. Key messages on the responsible use of credit facilities are also disseminated through radio programmes and events such as the annual National Economics and Finance Management Quiz, organized by the National University of Singapore Economics Society for students from junior colleges, polytechnics, integrated programme schools and centralised institutes.

4   Importantly, borrowers have a role to play in ensuring that they use credit responsibly, and within their means.  The national financial education programme MoneySENSE continues to work with partners such as ABS and the media to educate consumers on the importance of thrift and responsible use of credit facilities. ABS, with the support of MoneySENSE, has developed a consumer guide which has key information on what cardholders should know about credit cards, including information on interest, late payment charges, as well as the implications if a cardholder pays only the minimum sum and rolls over the balance. When banks issue credit cards, they send cardholders information based on this guide.

5   The Monetary Authority of Singapore (MAS) has in place several measures to mitigate the risks of over-borrowing by individuals.  MAS has set the minimum annual income requirement for credit cards at $30,000 to ensure that credit cards are only issued to individuals who have sufficient financial means to handle them.  The maximum credit limit, including any other unsecured credit facilities that a financial institution can give to such individuals is limited to four times his monthly income.  

6   Financial institutions must conduct comprehensive credit bureau checks before granting individuals credit cards. Through these checks, a card issuer can be informed of the number of credit lines that the applicant already has with other financial institutions and if the applicant has not been able to repay these facilities.  This supplements the rigorous credit assessments that MAS expects financial institutions to conduct before they grant credit to customers.

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¹ The rollover ratio refers to credit card balances outstanding for 30 days or longer as a percentage of total credit card balances.
² Default rates refer to the number of defaulters as a percentage of the total number of cardholders. Defaulters are consumers with a card status that has been written off as bad debt. Some of these defaulters may eventually be declared bankrupt.
³ According to data from IPTO, about 6768 cases (20% of bankruptcy cases) over the period 2000 to 2010 have declared the cause of their insolvency as overspending of some kind or other, including overspending on credit cards, on personal lines of credit, and on hire-purchase.
⁴ “Revolvers” refer to those who have not paid their outstanding credit balances in full.
⁵ “Frequent revolvers” refer to those who have not paid their outstanding balances in full for at least three consecutive months.
⁶ New credit cardholders refer to those who have been granted a credit card for the very first time in that year.