Thursday, November 25, 2010

Campaign to educate card users---JUST A LIP SERVIEC?

October 29, 2010
Campaign to educate card users

KUALA LUMPUR: The National Cards Group (NCG), in collaboration with the Association of Banks in Malaysia (ABM), has launched an educational campaign themed Swipe Smart with 6E in response to recent news over credit card usage and the consequences of credit card debt.

The campaign, the maiden effort by the NCG, started yesterday and will continue till the end of the year. It aims to educate credit card holders via six enablers: educate yourself, exercise caution, enhance your lifestyle, enjoy benefits, eliminate debt and engage your card issuer.

The NCG will feature six advertorials beginning Nov 1 in six national daily newspapers over a period of six weeks, while NCG members, of which there are 20, will make those advertorials available on their websites and hand out campaign leaflets at selected on-ground events.

The campaign’s objectives, aimed at the 3.5 million credit card holders who hold an estimated 9 million cards, are to inculcate the smart and responsible use and management of credit among cardholders as well as to encourage an overall positive view of credit cards by highlighting the benefits of effective use.
From left: Vince Au Yoong, Chuah Mei Lin and campaign project director Perry Ong at the launch of Swipe Smart with 6E on Thursday.

NCG chairman Vince Au Yoong said although credit card debt as a percentage of household debt was lower compared with the 1990s, there was a need for the campaign due to the lack of understanding and awareness on the function and use of credit cards.

“Credit card debt, at 6.3% of total household debt, is currently a small part of total household debt while credit card non-performing loans, at 1.8% of commercial banks’ debt, have been coming down,” Au Yoong told a press briefing yesterday.

He added that while there were concerns when credit card holders spent beyond their ability to repay debt, education on how to responsibly use the cards and manage their finances remained the NCG’s main priority and focus.

Besides this, Au Yoong said average approval rates for credit cards stood at about 40% as cards were given out to individuals who had proven their credit-worthiness.

Meanwhile, ABM executive director Chuah Mei Lin said credit card usage must be viewed holistically as it was also in line with the paperless payment trend.

She said as far as the industry was concerned, credit cards were useful tools for payment when they were used and managed properly.


October 30, 2010
A campaign to educate credit card issuers

IT is interesting to note that the National Cards Group – a grouping of Malaysian credit card issuers, mainly banks – has launched a campaign to inculcate responsible credit card usage among consumers.

They have called the campaign Swipe Smart with 6E, 6E being the so-called six enablers – educate yourself, exercise caution, enhance your lifestyle, enjoy the benefits, eliminate debt and engage with your card issuer.

Well and good. One should not pour cold water on such a noble deed by the card issuers to ensure that their customers are educated and know how to use the card responsibly without getting themselves – and in the longer run the issuers – into trouble.

It was good to see too that there were representatives from Bank Negara, the Federation of Malaysian Consumer Associations (Fomca), the Association of Banks and others there.

The only thing that was lacking was a similar campaign for card issuers, yes, you read right, the card issuers. You see, the credit card problem is a double-edged sword – both the behaviour of issuers and users contributes to delinquency. Eventually, if things really get bad, both sides will suffer – the users may become bankrupt and the banks may be saddled by high bad debts.

Both parties have to be responsible and there has to be a balance of profit with responsibility. There is a need to educate the card issuers too to, using the words of the National Cards Group but applied to itself this time, to inculcate responsible credit card issuance among card issuers.

We will even call the campaign by the same name – Swipe Smart with 6E – with its own six enablers. We hope, Fomca, who was present there, will take the cudgels up on behalf of the consumers, call the issuers and launch this campaign.

Here is our proposed 6E campaign directed at card issuers:

1. Eliminate profiteering such as late payment charges. We have written about this before. The effective interest rates on this are extortionate and exorbitant. If you are late by one day on an outstanding balance of RM100 (even if your credit limit is RM100,000!) the charge is RM50. That’s 50% a day or 18,250% a year! Now what entitles the bank or issuer to charge you such an interest rate when your credit limit is RM100,000 and you have an unutilised portion of this of RM99,900? If that is not profiteering, what is?

2. Ease up on your interest rates. Most of us pay 18% a year on balances outstanding when the fixed deposit rate is not even nudging 3%. They take your money at 3% or less, then lend it back to you for 18%! Housing loans are at 6%, why is the credit card interest rate three times that at 18%, a rate that only licensed money lenders charge?

3. Exercise restraint in your marketing. These days, have one credit card and other issuers deluge you with cards and offers. Sometimes they send a card to you that you don’t want and then three months later bill you for service charges! Then I have to call them – it takes ages to get through with a robot asking you whether you want to do this or that before you finally get through – and demand they withdraw their statement. And then they offer credit cards to all manner of people who don’t know how to use them or abuse the credit lines, so long as they have a regular salary – civil servants are great targets. And because they have a salary, the banks can get their money back – with huge penalties to boot.

4. Engage with your customer. Before they send us all that unwanted promotional material, the issuers should ask us if we want them. They should remind us – constantly – that outstanding balances cost us 18% a year, the highest rate of any bank facility, and if I am not mistaken, the highest possible legal lending rate.

5. Educate yourself on social and ethical responsibilities. Yes, we know profits are all important and yes we know there are a lot of ignorant people out there from whom money can be made. But don’t financial institutions have a social and financial responsibility to their customers, especially people, and to inform them fully of how they make money from them? If issuers want to educate the public on the dangers of credit cards, they should educate themselves on immoral behaviour and how the drive to profit stops them from truly educating the general public.

6. Explain all your charges and actions fully. I have not yet found an issuer who advertises that the penalty charge for late payment is as high as nearly 20,000% a year. Perhaps they should print this on the envelopes they mail to customers. And how many people know that many credit cards issuers impose a service charge on overseas spending, have unfavourable exchange rates for transactions, and have service fees for interest-free instalment payments? Can they tell us why they are not pushing debit cards (no interest here, the funds are transferred directly from your bank account) equally hard? The list goes on. It is time, if the issuers wanted to educate the public, for them to take huge full-page advertisements to fully disclose all their charges in the simplest possible language. If they can’t find anybody to write the copy for them in simple language, I volunteer to do it for free.

Well, that’s our 6E Campaign aimed at educating our banks and other card issuers in brief. We hope somewhere out there some consumer organisation will take up this case and that the authorities will sit up and take notice and realise that issuers too contribute to the credit card problem.

■ Managing editor P Gunasegaram notes with some trepidation the following figures for credit card usage in Malaysia: there are 9 million cards and the average transaction through cards is RM211mil a day or RM77bil a year. That’s a lot of potential for some to make a lot of money and a lot of others to lose some.