Brakes on debts with higher income limit

  • Nation
  • Sunday, 20 Mar 2011

PETALING JAYA: Bank Negara’s move to increase the minimum annual income requirement for credit card eligibility to RM24,000 from RM18,000 will create more disciplined spending among cardholders.

MIDF Research chief economist Anthony Dass said it would help decrease the likelihood of potential systemic risk.

“The risk will be less for people to default on their personal, car and housing loans too,” he ex-plained.

The central bank announced on Friday that new applicants would need to have a minimum income of RM24,000 from RM18,000 per annum previously.

In addition, cardholders earning RM36,000 and less per an-num can only hold cards from a maximum of two issuers, while their credit limit will be capped at double their monthly income.

“This will reduce the risk of a household debt crisis, which is more likely to come via credit cards rather than the housing loan,” Dass said, adding that Malaysia’s total household debt was one of the highest in Asia at 77% household debt to GDP ratio in 2009.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the new rules would ensure that access to credit cards was limited to those in the higher-income group.

“This is a good preventive measure to ensure manageable household debt levels,” he said.

Malaysian Economic Assoc-iation exco member Prof Dr Saadiah Mohammad said the move would help discipline cardholders in their spending habits.

“Many from the lower-income group and students are tempted to spend much more than they can repay,” she said.

Maybank chief executive officer Datuk Seri Abdul Wahid Omar said the new guidelines would not have much effect on the number of credit card holders as the majority were from the higher-income group.

“Only about 17% of Maybank’s credit card holders are those earning less than RM36,000.

“We have over one million credit card holders.

“It is important to understand that the move by Bank Negara is aimed at bringing under control rising debt within that income group and we (Maybank) support it,” he said.

Earlier Story: Bank Negara sets new rules for credit cards

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