Read fine print in credit card bills

Such scrutiny may save you from financial heartache

This article first appeared in The Sunday Times on Dec 21, 2014.

I must be the only person in the world who gets a kick out of reading a credit card bill from the first page to the last.

The moment the perfectly sealed envelope lands in my hands, I seize my trusty letter opener, slit the flap in one swift motion and pull the statement out.

Once a cursory glance of the figures reaffirms the damage done, I start reading the rest of the pages like an Apple devotee deprived of news of the next iThing.

Being careful - or some say paranoid - with documents has been natural to me ever since I had to pay the annual fee on my debit card some years ago in university.

Outraged but clueless about how fee waivers worked - you basically call the bank and threaten to sever ties - I vowed never to miss another figure or fact on statements.

The undivided attention I give my bills means there is no way I could have missed the recent hikes of credit card interest rates on outstanding balances.

After reading the note on page two that day, my eyes grew to the size of dinner plates and my heart started racing as I went over the words with a yellow highlighter.

All this from the mere possibility of being mired in even greater debt than before.

Okay, I exaggerate.

But just seeing credit card interest rates rising 1 percentage point set off all sorts of alarm bells for me, especially since I've interviewed many people trapped in the debt cycle.

The interest on outstanding balances now ranges from 24.9 per cent to 25.92 per cent after local banks began raising rates back in September.

Take an outstanding balance of $500 and an interest rate of 25.92 per cent a year.

If you pay only the minimum sum of $50 and do not use your credit card during the month, the estimated interest charges work out to $10.80.

Don't forget that the average bank savings deposit rate was a measly 0.11 per cent last month.

To add insult to injury, interest rates on cash advances also rose in recent months, and if you looked hard enough, some banks hiked certain administrative fees as well.

These changes pose no problem to me as I always pay my bills in full and on time.

But what about so many others who don't?

Mounting debt is a real problem, and Credit Counselling Singapore (CCS) president Kuo How Nam has noted that the average debt of a person seeking its help is $84,000 - equivalent to 28 months of a person's disposable income.

Half of those counselled by CCS said the main reason was overspending, including buying brand-name bags, clubbing and indulging in lifestyle wants amid normal living expenses.

I knew what I had to do: Inform the masses through an article, which was published earlier this month.

I figured various banks had quietly raised interest rates, and sure enough, announcements were relegated to page two or three of credit card statements.

Banks say it's been years since the last revision, but if that's the case, they should be doing more to let consumers know.

Any changes relating to interest rates or hikes in fees should be introduced on the top of the bill's first page, in bold.

What is really needed is more transparency, which the Consumers Association of Singapore (Case) has been calling for with regard to unclear charges on credit card statements.

I suggest sending SMS blasts regarding such changes to cardholders, instead of yet another inane text for a credit card or loan I do not need for the thing I cannot afford.

Text messaging should be utilised to alert and inform consumers, not just market products and services.

Many of my friends who read the article earlier this month were surprised to learn about the changes made by the banks.

I had friends texting me. One said he had a few discussions with colleagues.

I had felt completely alone for a while, given that no one else seemed to have noticed something as major as this at the same time I did. You know, friends with whom I could dissect and tear apart the latest news from the bank.

Here is how I imagined a text conversation would go:

"OMG, did you read page two? I can't believe these banks, how dare they?"

"You should turn to page three now, there is some promotional offer that we should take advantage of."

I have given up hope on that ever happening, as I have realised that many people don't even bother with their bank statements and other bills.

A friend told me: "I sometimes use my unopened documents as coasters for cups of tea. I open them a week later and, after I read them, they go back to being coasters."

I take comfort in the fact that at least she files important things such as tax statements.

I also see how easy it is with e-statements to dismiss what's going on beyond page one.

You log on and open the file but your eyes start to glaze over at the words onscreen. Soon you're on Facebook, looking at someone's latest winter holiday photos.

After I told my friend N about my so-called reading habits, she said: "You remind me of my granddad. He used to scrutinise his bank statements; calculate the interest and stuff."

If reading the fine print saves some money and trouble, more people should be like N's savvy granddad.

rachaelb@sph.com.sg