Credit Cards in Singapore

In a developed society like Singapore, credit cards are everywhere. The transition from spending paper money to relying on electronic banking has grown exponentially due to the convenience of going paperless. Debit cards and credit cards are hugely popular amongst consumers; with the latter even more so, due to the larger rewards that consumers are promised, with the use of credit cards. However, as convenient as advertisements portray credit cards to be, these little pieces of plastic have the power to cripple a person through overspending and irresponsible financial habits. This essay will go on to explore three different ways in which a major target group of credit cards- the youths- are finding themselves increasingly burdened with growing debts from the usage of these cards.

One of the causes of growing credit card debts in Singapore is poor consumer habits. Many Singaporeans are finding it a challenge to manage their finances responsibly. Singaporeans in their early twenties to mid-thirties are chalking up credit card debts because they do not know how to budget their expenses well. The local online news portal Insing (2014) recently published an article about a 33-year-old man named Terrence, who has been in severe debt for the past two years due to over spending on his credit card^[1]. He now spends 88 percent of his monthly salary repaying just the interest on his credit card loan which has amounted to $70,000 so far. Just like him, there have been numerous cases of Singaporeans who are spending over their means, incurring debts that far exceed their salary. This has led these people to find all means to pay off their loans, like taking a second job or borrowing even more money to pay off their initial loans, leading to a vicious cycle of never-ending debt for the latter scenario. The Straits Times (2014) indicated an astonishing figure of 62,830 credit card customers who had defaulted on their payment in July 2014; a 12.7 percent increase from the previous year^[2]. Credit card customers also tend to display a “buy-now-pay-later” mind-set, according to an online financial advisory blog post .^[3] People tend to think that money will eventually be attained with certainty at a point in future, therefore racking up huge bills at the current moment without concern for debt. Another indication of poor consumer habits is impulsiveness. Young Singaporeans have shown great desire in recent decades for luxury goods such as branded bags, cars and watches. Without careful consideration of their budget, these Singaporeans have begun to use their credit cards frivolously, buying expensive items the moment their desire takes over.

The next cause of an increase in credit cards debts among young Singaporeans is the major expenses that Singaporeans claim to incur. These expenses include the purchase of property, private transport and the paying off of education loans. According to InterNations^[4] Singapore was listed as the 6th most expensive country in the world in 2012. A condominium in the Central Business District costs an average of $15,000 a month in rent alone. Even a simple Housing Development Board (HDB) flat costs about $2000-$3000 a month in rent. For young couples, this is an exorbitant amount of money, but very necessary for survival. Sometimes despite having good spending habits, young Singaporeans still find themselves in credit cards debts due to the fact that some expenses in Singapore are costly yet inevitable. Another example of such an expense would be an education loan that University undergraduates may take while pursuing a degree. With high competition for places in local universities, many Singaporeans are turning to institutions abroad for a higher education. Such a choice may see a person paying up to $2500 just in accommodation alone while studying in Australia. This does not take into consideration the University fees, which could leave a person in a debt of about $262,000^[5] for a non-medical degree. Therefore, the impact of costly yet unavoidable expenses certainly is one of the reasons for the surge in credit card debts amongst the youth.

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