SINGAPORE - Despite rising inflation and slower growth in 2022, credit card holders continued to splurge on discretionary purchases such as bubble tea, online gaming and travel, bank data showed.
Official data from the Department of Statistics also revealed a jump in credit card debt levels throughout 2022 to its highest since before the pandemic, although industry insiders said this appears to be under control for now.
Data from UOB, which was based on spending patterns and transaction volumes on its credit and debit cards between January and November 2022, showed that card holders spent the most on bubble tea compared with other beverages, said UOB’s head of group personal financial services Jacquelyn Tan.
For example, the total amount spent on bubble tea was almost triple that of coconut shakes, which is also a popular beverage among consumers.
The bank declined to provide absolute figures on transactions and volumes and spending figures.
The other high spend category was online gaming, where the amount grew by almost 25 per cent from January to November. The average spending per transaction rose 17 per cent during the period compared with the same period in 2021, UOB said.
Communications manager Kelly Chiew, 29, is one of those who spends quite a bit on bubble tea and gaming. Ms Chiew told The Straits Times that she spends around $50 or more every month on bubble tea. She also purchased a Sony PlayStation 5 and new games for the console recently.
Ms Chiew, who is expecting her first child soon, said on average she spends up to $1,800 a month.
Another big spend category for card holders was travel – South Korea was the top destination for UOB customers, followed by Australia and Japan, said UOB’s Ms Tan.
Trust Bank Singapore, a digital banking venture between Standard Chartered Bank and FairPrice Group which launched on Sept 1, is seeing a similar trend. The bank said its customers travelled to 102 countries, with Malaysia being the most popular destination and Argentina being the farthest from home.
Indeed, Singaporeans were bitten by the travel bug after being confined at home for two years.
As borders reopened, some like Mr Tay, 37, travelled round the world with his family – from Bangkok and Perth to Norway and Switzerland. The business owner, who gave only his surname, has already planned and budgeted for the family’s holidays to South Korea and Japan in March and December 2023.
Lab technician Dallas Goh, 31, also spent quite a bit on a trip to South Korea in 2022 with his wife and daughter.
Marketing manager Ang Jian Hui, 37, travelled too, but to nearby locations. His family went to Bintan and back to the Philippines to visit his wife’s family.
But as discretionary spending picked up with the 2022 reopening of the economy, data compiled by the Department of Statistics showed that households accumulated more credit card debt in the third quarter of the year. Card debt rose 12.3 per cent from the first quarter to $12.1 billion in the third quarter. The level of credit card debt was the highest since the fourth quarter of 2019, when it reached $12.6 billion.
The situation is not a concern if people pay off their bills in full every month to avoid incurring and accumulating high interest charges on the outstanding amount as well as late payment fees.
Credit card interest charges are among the highest in the banking industry, with all three local banks charging more than 26 per cent a year in late payment interest.
Ms Tan Huey Min, general manager of Credit Counselling Singapore, said credit card debt becomes a problem when people roll over their bills, or pay only a portion of their credit card bills. A high interest rate is incurred on the remaining amount that is not paid, she added.
“If a card holder continues to make more purchases with his credit card and pays off only part of his bill every month, his outstanding credit card debt will grow,” Ms Tan said.
“If you pay off in full and in time when the bill comes, you can still have fun. Enjoy yourself a little bit,” she added.
For now, Ms Tan said things appear to be under control, with the number of first-time borrowers looking for help with credit card problems down 14 per cent from last year.
With a recession looming though, those whom ST spoke to said they will cut back on discretionary spending in 2023 if needed.
For Ms Chiew, that will mean less bubble tea and gaming, while Mr Tay said he will consider cutting all holiday trips in 2024 if he is hit hard by a recession in 2023. Mr Tay added that he will focus more on increasing his income streams because “there is a limit to how much you can cut expenses, but no limit for you to increase income”.
But Mr Ang said he is not going to lose sleep over a recession, which is beyond his control. “I will see where I can cut spending and probably sell the car to save some money,” he said.
Correction note: An earlier version of this story said the data revealed a jump in credit card levels. This data refers to official data from Department of Statistics.