Current events
From Putera Wiki
Credit card has become so entrenched in today’s modern living that most people have at least one credit card. The credit card industry is booming and becoming very competitive. Banks are aggressively promoting their credit cards by offering attractive promotions for credit cards with endless benefits and discounts. With the ease of applying and obtaining a credit card more and more people are using credit cards for purchases than cash. Nevertheless, the question to ask is “Credit Card – Is it a convenient tool or a debt trap for a consumer?” The major attraction of credit card to the public is convenience. With a credit card in one’s pocket, one does not need to carry large amounts of cash nor would one be likely to end up in an embarrassing situation where you do not have sufficient cash to pay for your purchase. It can also play a role in proving your creditworthiness such as to obtain urgent medical attention at a hospital for example.
The public however must remember that using a credit card to buy carries an obligation to pay. There is therefore more to using credit cards than simply charging purchases. Therefore, credit cardholders should always ensure that all transactions charged to the card are within one’s capacity to repay when due. Recently, concern was raised in view of the rising bankrupts in the country. Statistics had shown that bankruptcy cases had increased by 24% between 2003 and last year, from 12,351 to 16,251. An estimated 8.6% of the 16,251 new bankrupts were credit card defaulters.
Are the banks too lenient in issuing out credit cards without checking the credit standing of a person applying for a credit card? Although banks are actively growing their card base, they are ever mindful of the credit risk involved in providing an unsecured line of credit.
The evaluation criteria for a credit card is in fact even more stringent, reason being that it is an unsecured line of credit. Banks have their own credit guidelines/policy in place on granting of credit card to customers and use leading edge technology tools and techniques, which include bureau checking and other credit verifications before an application is approved. In addition, banks have to comply with the guidelines on credit card issued by Bank Negara.
A lack of personal financial management rather than alleged indiscriminate lending is the cause of the rise in credit card defaulters. Banks constantly communicate the need for proper conduct of account to avoid default. There are many reasons that could have lead to customers defaulting credit card payments such as loss of employment or business failure, emergency and other loan commitments.
Customers who use credit cards need to use them wisely and prudently. Then, they would not only enjoy the convenience that the cards bring but can also plan their card transactions to their benefit. Granted it may not be easy for some people to check their financial position to ensure that they are spending within their means. It is therefore important that one should learn to develop the habit of paying bills when due without incurring late charges or interest. By doing so, the cardholder will be well o the way to achieving convenience and peace of mind that comes with a credit card.
