October 29, 2009

bad debt?

Spotted this today in TheStar:

Chor: Credit card tax meant to promote prudent spending
KUALA LUMPUR: If banks were to “absorb” the RM50 service tax imposed on credit and charge cards, it would defeat the Government’s aim of reducing the use of the cards to prevent accumulation of bad debts.

Deputy Finance Minister Datuk Chor Chee Heung said the target was “to limit the number of credit cards” in circulation.

He said the policy was not to increase the Government’s coffers as it would only amount to an annual revenue of a few hundred million ringgit.

“This is one of the ways to educate the public so that they will not borrow money through their credit cards. This is not a healthy practice. If financial institutions absorb the cost, it will defeat the purpose of having the policy,” he said while pointing to a newspaper report about a businessman who has 40 credit cards.

“Actually, you only need two cards,” he said.

Prime Minister Datuk Seri Najib Tun Razak announced in the 2010 Budget the proposal to impose a RM50 annual service tax on each main credit and charge card and RM25 on supplementary cards.

If implemented, some financial analysts predicted that at least 30% of the 11 million card holders who have more than one card will have to pay RM100 each every year.

Chor said the Government hoped that the new tax would induce card holders to cancel excessive cards and spend wisely.

Cheong Wen Lee, a representative of a group of credit card agents, claimed that the policy would affect the livelihood of more than 5,000 credit card agents.

He said that since the new tax was announced last Friday, the number of applications for new credit cards had dropped by 80%.

The group, he said, would appeal to the Government to reconsider the decision as they believed that there were better alternatives to promote prudent spending among the people.

Several banks declined to comment when contacted.

Pardon me but, isn’t it a good thing that we spend more? It keeps the economy going – as people say. Banks are spending literally millions to encourage people to spend more. And now, our government comes up with this 50 fucking ringgit charge to reverse that effort. To promote ‘prudent spending’ they say. What the fuck.

I was thinking, wouldn’t it make more sense to regulate the eligibility for a credit card instead? Many years ago, it was hard to apply for a credit card unless you earn a minimum wage of a certain amount. That is to make sure one is able to pay up the debt. Just like how banks decide whether to authorize a mortgage plan.

It seems that nowadays, any asshole can apply for a card. Bad debt happens when these assholes fail to earn fast enough to pay up what they have spent.

In short, more cards does not equal bad debts. An asshole can still get a bad debt even without a card. Go figure.

michaelooi  | snippets  | 

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