Rise in credit card and other unsecured debt in Singapore

SINGAPORE: Credit card billings continued to stay above the S$20bil mark in the first quarter of 2024, although there was a slight fall of about 5% from the high of S$24.3bil in the previous quarter.

The billings first crossed S$20bil in the third quarter of 2022.

The latest amount of S$23.1bil may have been a dip from the previous quarter, but credit card rollover balance and bad debts written off have risen, according to the credit and charge card statistics from the Monetary Authority of Singapore (MAS) on May 31.

The card rollover balance had crossed the S$7bil mark, rising to S$7.25bil in the fourth quarter of 2023. The rollover balance rose further to S$7.33bil in the first quarter of 2024, an increase of 1.1% from the previous quarter.

The rollover balance is the outstanding credit card balance that is not paid by the due date and is subject to interest charges.

At the same time, bad credit card debts rose nearly 20% to S$89.4mil, a level not seen since 2021.

Bad debts are debts that are no longer deemed recoverable and must thus be written off.

The MAS credit card data is in line with household balance sheet data from the Statistics Department (SingStat) which was released on May 28.

SingStat data showed that credit card debt grew 15.8% in the first quarter from the same period a year ago to S$14.6bil.

Growth in credit card debt was stronger in the first quarter compared with the third and fourth quarters of 2023. Both quarters recorded growth of 13.3%.

The growth in credit card debt contributed to an increase in personal loans, which rose for the first time since the fourth quarter of 2022. Personal loans include credit card debt, car loans and other loans like education loans and renovation loans.

In the first quarter, personal loans edged up 0.2% to S$95.5bil.

Besides credit card debt, car loans also contributed to the rise in personal loans.

Motor vehicle loans grew 1% to S$9.9bil, marking the first increase since the third quarter of 2021.

As a result, household liabilities, which include mortgage loans and personal loans, went up for the second straight quarter.

Household liabilities grew by 1.7% in the first quarter of 2024 from the same period a year ago to S$364.8bil.

This extends the growth from the fourth quarter of 2023, when liabilities grew 1% year on year to S$364.2bil.

Most personal loans, such as credit card debt and renovation loans, are unsecured loans not backed by collateral.

Motor vehicle loans are considered secured loans as the car can be repossessed by the bank in the event of default.

In Singapore, Credit Counselling Singapore (CCS) helps cash-strapped borrowers with their unsecured debt problems through counselling and by working out more manageable debt repayment arrangements with the banks.

Its general manager, Tan Huey Min, told The Straits Times that she has seen an uptick in the number of borrowers who came forward to seek credit counselling support.

Between November 2023 and April 2024, CCS counselled 867 borrowers, an increase of 7% from the prior six-month period of May to October 2023.

Tan added that many of those who sought help tend to have accumulated their debts over months or years.

The typical distressed borrower uses his credit card to pay bills or buy stuff, and because he does not make payments in full, the outstanding balance is rolled over.

Every month, he spends some more and adds to his outstanding balance.

This outstanding balance incurs interest rate charges of between 25.9% and 27.9%, which all add up, she said.

In 2023, the average debt size of the individuals who sought CCS’ help was about S$95,409, while the median debt size was S$51,609.

The median is the middle value when the debts are sorted from low to high, while the average debt size is the total debt size divided by the total number of borrowers.

An average debt size that is bigger than the median debt size implies that there were some borrowers who owed much more than their peers.

The MAS has safeguards in place. The regulator has placed a limit on the amount of unsecured credit that can be granted to those earning less than S$120,000 a year.

The balance-to-income ratio has been set at 12 times monthly income since June 1, 2019.

It means that the borrower’s outstanding interest-bearing unsecured debt cannot exceed 12 times his monthly income.

If it exceeds the 12 times limit for three consecutive months, MAS regulations state that financial institutions cannot grant him additional unsecured credit facilities. — The Straits Times/ANN

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Credit card , loan , billing , liabilities , household


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