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Wednesday September 25, 2013 MYT 12:00:00 AM
Wednesday September 25, 2013 MYT 7:19:44 AM
Debt-trimental: Data shows many are failing behind on payments.-The Straits Times/Asia News Network
More people are now struggling to pay off their credit card bills, new figures show, as if underlining the need for the tough new rules governing credit card debt.
Data released by the Credit Bureau Singapore (CBS) yesterday also show that as well as falling behind on payments, they are now owing more.
As of July, there were 62,830 unsecured credit customers who had not made a minimum payment in two months – a striking 12.7% more than the 55,726 people in that category last year.
Unsecured credit includes credit cards, overdrafts and personal loans that are not backed by collateral.
The total amount on unsecured cards, overdrafts and personal loans that are two months or more past due rose as well.
It stood at S$230.7mil (RM591mil) in July, up from S$212.5mil (RM545mil) last year and S$183.8mil (RM469mil) in 2011.
Consumers now rack up an average monthly debt of S$8,030 (RM20,500) on credit cards and overdrafts – up from S$7,859 (RM20,150) last year and S$7,349 (RM18,840) in 2011.
The steady rise in red ink is likely why the Monetary Authority of Singapore launched new rules on unsecured credit loans earlier this month, said CIMB regional economist Song Seng Wun.
“After the binge, comes the belt tightening. When the bad loans are rising against the backdrop of an unexpected external shock or the risk of interest rates going up, the possibility of people on the margin and defaulting is there,” said Song.
The new rules include barring financial institutions from giving out more loans to people whose unsecured debt totals more than 12 months of their income for 90 days or more.
CBS research also found that people aged 35 to 39 had the highest percentage of delinquency and were most likely to roll over credit card debts compared with those in other age groups.
CBS executive director William Lim said that people in that age bracket could have major financial commitments like having their first house or child.
“For most of us, in that age range, your level of financial responsibility is probably at its highest and your financial resources may not be at their peak. You’re probably at your peak when you’re in your 40s for most people,” said Lim.
However, there were also some encouraging figures from CBS.
One showed that the overall delinquency rate dipped slightly, from 6.5% in March last year to 6.4% in March this year.
This means that the proportion of people who failed to make repayments for credit card billings, and home, motor and study loans fell marginally.
The average credit score of consumers nationwide has also risen – from 1,897 in March last year to 1,904 this year out of a maximum score of 2000.
The higher the score, the lower the risk of the consumer falling into default.
Lim said credit scores have likely improved on the back of more responsible behaviour. — The Straits Times / Asia News Network
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