Credit card debt doubles in less than four years
BANDAR SERI BEGAWAN
BRUNEI'S total credit card roll-over balance in the third quarter stood at $343.6 million, Second Minister of Finance Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim saidyesterday.
That's a 100 per cent rise from the $172.8 million recorded in 2005, the minister told members of the State Legislative Council (LegCo) during their meeting where he explained the rationale for the tightening of credit card regulations in a country with a population of approximately 400,000 people.
During discussions at the Dewan Majlis, Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman stated that based on the Ministry of Finance studies, in September 2009, a total of 70,704 credit cards were issued to the lower income group (or individuals with monthly earnings of $1,500 and below).
The number was equivalent to 44.32 per cent of total card holders in the country.
"During the same time frame, the number of credit cards issued has seen an increase of 58 per cent from 101,243 cards to 159,332 cards. Based on the collective interest of two per cent per month (26.9 per cent per annum), that means interest payments of all credit card holders amount to $92 million," Pehin Dato Hj Abdul Rahman said.
The second minister also stated that 90-day non-performing credit cards accounts have also increased to a total of $111.5 million over the same period.
Pehin Dato Hj Abdul Rahman also addressed that the increase of minimum card payment from two per cent to five per cent and eventually eight per cent in June is necessary. If a consumer continues paying two per cent a month, he will never clear his credit card debt, he explained. The directives tightening regulations on credit card debts were issued on the last day of 2009 by the Ministry of Finance to regulate the distribution and use of credit cards to curb mounting consumer debts in Brunei.
The regulations provide guides on how banks are to determine credit limits they extend to clients based on their monthly income and that minimum repayment on credit cards will be increased to eight per cent in June as compared to two per cent previously and five per cent now.
Clients who cannot maintain their credit card accounts with a certain bank are to settle their outstanding obligations within 36 months and can only have an issued credit card from the bank in which their payrolls are deposited. If he chooses to maintain a credit card account with another bank, he is required to keep a fixed deposit to gain a credit card of the same amount.
International and local banks have already launched their campaign to gun for payroll accounts, unleashing within days of each other in February cash offers for salary accounts in a bid to lock in clients for their credit card business.
Standard Chartered Bank's special promotion rewards customers who transfer their salary to the bank will be guaranteed cash rewards. Hongkong Shanghai Bank Corporation (HSBC) was the first bank to introduce a promotion on payroll, offering cash prizes of up to $50,000 and 100 mobile phones to be given away to existing customers with their salary assigned to the bank and for customers who eventually transfer their salary.
Baiduri Bank is holding a series of lucky draws with 15 draws worth $1,000 from March to June and a grand draw in July where the first place winner gets a $100,000 savings gift voucher. Bank Islam Brunei Darussalam, the latest to enter the race, has come up with a Credit Card Care Programme whereby they consolidate consumers debts into one financing solution with a lower interest rate.
The Brunei Times