Forum: Sufficient safeguards to mitigate risks of over-indebtedness from credit cards

We thank Mr Foo Sing Kheng for his suggestions on possible measures to curb the rise in credit card debt (Take more effective measures to curb rising credit card debt, Jan 6).

MAS requires financial institutions (FIs) to implement a set of safeguards to limit the risk of consumer over-indebtedness.

These include suspending credit cards for borrowers who are more than 60 days past due in their repayments. FIs must also suspend credit cards of borrowers whose total outstanding unsecured debt across all FIs exceeds their annual income for three consecutive months. FIs can reinstate credit card facilities only after the borrower repays his debts to within allowable limits, and after further income and credit checks. FIs are additionally required to conduct income and credit checks before issuing new credit cards, increasing credit limits, or when informed of potential concerns about a borrower’s creditworthiness.

These safeguards also apply to cardholders who use their credit cards to pay for amounts owing under Buy Now, Pay Later (BNPL) facilities. All BNPL firms in Singapore have also committed under the BNPL Code of Conduct to consumer protection safeguards such as to suspend accounts of defaulting BNPL users, not to compound interest or fees, and not to pursue bankruptcy proceedings against customers. These measures limit debt accumulation from BNPL and its impact on users.

MAS closely monitors developments in consumer indebtedness. While credit card rollover balances have increased, incomes have also grown. As a share of personal disposable income, rollover balances are in line with the historical average and below pre-pandemic levels. Only a small minority default on their credit card payments. The credit card delinquency rate is less than 1 per cent as at Q3 of 2024, and below the historical average.

MAS actively encourages individuals to be prudent in managing their personal finances. We seek to inculcate good spending and borrowing habits through MoneySense, our national financial education programme. MoneySense educates the public on money management skills and financial budgeting, urging consumers not to spend beyond their means and highlighting the risks associated with credit cards, BNPL schemes and other instalment plans.

We will continue to monitor the situation closely and review existing measures as necessary.

Lu Xinyi
Director (Corporate Communications)
Monetary Authority of Singapore