Forum: Credit cards not meant as long-term credit facility

We thank Mr Joe Chua Cheok Kwang for his suggestions on credit card interest rates (Cap credit card interest rates to protect the vulnerable from crippling debts, Feb 27). 

Credit cards are not meant as a long-term credit facility as the interest charge can be high. Our national financial education programme, MoneySense, has been reminding consumers to pay credit card bills in full and on time.

While credit card interest rates are set commercially by financial institutions (FIs), the Monetary Authority of Singapore’s (MAS) approach is to equip consumers to make informed decisions about credit card usage and manage credit responsibly, through transparent fees and charges and financial literacy.

There are also regulatory safeguards to mitigate the risk of consumer over-indebtedness, such as borrowing limits based on outstanding amounts aggregated across FIs and suspending credit cards for borrowers more than 60 days overdue.

To help customers manage borrowing costs effectively, MAS also requires that interest charges be clearly and conspicuously disclosed in credit card statements.

Where a customer has not paid the prior month’s bill in full, FIs must provide a projection of the total amount due, including principal, interest, fees, and the estimated time for the customer to fully pay off outstanding amounts, if they make only the minimum payment.

The Association of Banks in Singapore’s Code of Consumer Banking Practice establishes standards for banks’ disclosure of key terms and conditions, including effective interest rates and fees to aid comparison during sales and marketing.

Borrowers should carefully assess this information, including the cost of borrowing, to ensure that they can afford the loans.

Customers facing financial difficulties can contact their FIs to explore payment restructuring options, or approach Credit Counselling Singapore for credit counselling or to work out debt management plans. These plans can help reduce the interest burden and help borrowers work down their existing debts.

Lu Xinyi
Director (Corporate Communications)
Monetary Authority of Singapore