- POSTED: 16 Sep 2013 21:44
This graph is an experimental feature that tracks number of views over time.
Credit card debt distress levels in Singapore do not differ significantly across age groups.
SINGAPORE : Credit card debt distress levels in Singapore do not differ significantly across age groups.
And across all age groups, credit card default rates are at below 0.2 percent.
This is based on a written response by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam to a parliamentary question from Nominated Member of Parliament Mary Liew.
Mr Tharman is also Chairman of the Monetary Authority of Singapore.
Last week, Singapore's central bank tightened rules on personal loans, citing the need to help individuals avoid getting into debt problems.
Despite the low default rates, Mr Tharman noted that the risk of people borrowing beyond their means should be reduced.
To do this, the Monetary Authority of Singapore last week introduced new rules on credit card and unsecured lending.
Individuals with unsecured debt across all financial institutions that exceed 12 months' of their income, will be denied new unsecured credit.
This will take effect from 1 June 2014.
Currently, Channel News Asia understands a bank is able to find out how many credit lines a customer has but it is not privy to the total amount of debt the customer has with other banks.
Ng Kian Teck, Lead Analyst, Voyage Research, said: "The banks don't really see how much each bank loans to each customer. So the 12-month limit is what we call a precautionary measure. They didn't want too many people to exceed this quantum, because exceeding the 12-month limit would mean that you are paying one quarter of your salary to purely interest payments every year."
In his written reply, Mr Tharman said in the first half of this year, 250 individuals, or 31 percent of those who sought help from Credit Counselling Singapore, were 35 years old and younger.
The average age of individuals seeking help from the charity - mostly for credit card debt - is 40 years.
And according to the Credit Bureau Singapore, the majority of credit cardholders who are past due or defaulted on their credit card loans are in their 30s and 40s.
Vinod Nair, CEO, MoneySmart.sg, said: "For most consumers, it actually makes sense to pay off the debt that you owe the highest interest first, but to get the ball rolling and to get into the habit of repaying your debt, you might also want to consider paying off the least amount first."
The Monetary Authority of Singapore has said that it expects banks to work actively with affected borrowers to refinance or restructure their debt.
This could mean reducing monthly debt repayments, until the borrower can afford to pay more.
"We will work with customers who need help to work out a reasonable and sustainable repayment arrangement, taking into consideration their income, essential expenses and other financial commitments," said a DBS spokesperson.