Why is this the case? Not mentioned in the report are the predatory lending practices adopted by banks. Calling to offer you credit lines and fast money. Not everyone is sophisticated enought to understand these instruments.After the sub prime bubble..... get ready for the credit card bubble brought about by credit defaults by consumersUnder 30, employed and deep in debt Young adults are not just facing credit woes - more of them are also becoming bankrupt By Teo Cheng Wee They are below 30, employed and mired in debt. This is the fastest-growing age group of debtors, say credit counsellors. On average, they owe $55,000 to about seven creditors, according to new data from Credit Counselling Singapore (CCS), a non-profit group which advises debtors. Under-30s made up 9 per cent of all cases handled by it in 2006, and 13 per cent last year. In the first three months of this year, it went up to 15 per cent. CCS told The Sunday Times that most of these young adults are snared by materialism and a desire for the high life. They splash money on cars, branded goods, overseas holidays, clubbing and gadgets. Young adults are not just facing credit woes - they are also forming a bigger percentage of those who become bankrupt, according to the latest figures from credit analysis firm Amequity. Last year, people aged 30 and below made up 7 per cent of all bankrupts. In the first four months of this year, that has increased to 12 per cent. A third report, by the Credit Bureau of Singapore (CBS), which tracks consumer credit behaviour here, also points to the same trend. Released on June 13, the report noted that young adults aged 21 to 29 were more likely to miss their credit-card payments, or not pay them in full, compared with other age groups. CCS president Kuo How Nam feels that it is a 'definite cause for concern to see more young people with bigger debts'. He puts it down to them succumbing to the temptations of consumerism, while knowing little about financial and credit management. 'Faced with the euphoria that comes from finally earning some real money, youngsters tend to underestimate the income required of a certain lifestyle,' he said. Indeed, 'overspending' is the top reason given by people in this age group for being in debt. Mr Leong Sze Hian, president of the Society of Financial Service Professionals, has been surprised by questions from young bankrupts at the weekly briefings for new bankrupts on the Official Assignee's premises, where he volunteers. 'They often ask 'Will my guarantors be bankrupt?'. They clearly don't realise what bankruptcy means,' he said. He has observed more young faces at the sessions and noted that young bankrupts are typically not rich, and that their debts usually stemmed from car loans and credit-cards debts. Hong Kah GRC MP Zaqy Mohamad, who sees young adults once or twice a month over credit problems, feels that they have a false sense of security. 'They always assume that because they're young, they can earn more and their salaries can only go up. That's why they dare to buy things on credit,' he noted. 'They don't give any allowances for losing their job or suffering a pay cut.' Besides suggesting that schools start equipping students with credit and financial management skills, Mr Kuo also pointed fingers at the 'aggressive marketing' of credit-card companies. He said that financial institutions should practise more responsible lending and not encourage the proliferation of credit cards among the young. CBS general manager Mark Rowley, however, said that 'it's very difficult to criticise the banks, as they're in the business of lending money'. The silver lining, he noted, is that the percentage of young people who default on credit-card payments is relatively low compared to other countries in the region. 'And Singapore has the safeguard of credit-card limits. In many economies, there are no limits at all,' he added. chengwee@sph.com.sg
Consumer debt goes up It indicates more people are unable to meet payments as crisis worsens (http://www.straitstimes.com/STI/STIMEDIA/image/20081102/ST_IMAGES_LTCREDITBOXNEW.jpg) [SIZE="1"]Credit cards are a way of paying easily for purchases, not a credit facility. Before making a big purchase, experts advise that consumers ensure they have the funds to make the payment in full or via instalments. -- PHOTO: BLOOMBERG [/SIZE]DEBT collectors in Singapore are seeing more consumer debt submitted to them for collection - and they foresee more consumers being unable to pay up if the global financial crisis deepens. It is the first sign that the crisis has hit home with credit-card users in Singapore, financial experts say. Ms Chen Yew Nah, managing director of DP Information Group, which has a debt collection arm, said its consumer debt cases more than doubled from March to last month, while the total sum collected was up 20 per cent over the same period. 'We have already detected a downturn in consumer repayment behaviour as a result of the credit crisis,' she said. 'We foresee a greater and more visible impact on defaults and rollover amounts in the coming months. This would be due to greater job losses and general negative consumer sentiment.' Debt collectors visit the homes and offices of credit-card users to try and personally recover debts overdue. Banks and other financial institutions that provide credit call on collectors as a last resort, especially when phone and e-mail reminders to pay up are ignored. An increase in debt collection cases therefore signals that more customers are unable to meet their credit card payments. Ms Chen identified three main groups of affected consumers: those who lose their jobs suddenly, those who are stricken with ill health leading to an immediate drain on their finances, and those weighed down by excessive debt. During the Asian financial crisis a decade ago, it was the first group, those who lost jobs, who felt the heat on credit-card debt, she said. 'When you see unemployment going up, it's more worrying. It's this next stage we're looking at, and I suspect there'll be more to come in terms of percentage of non-payments.' Financial advisers added that, anecdotally, they are seeing more cases of financial stress among cash-strapped individuals. 'A year ago, about 30 per cent of cardholders were rolling over their balances, but now about 40 per cent of cardholders are rolling over every month,' said Mr Leong Sze Hian, president of the Society of Financial Service Professionals. He said that while some people choose to roll over balances to 'finance their lifestyles', others are unaware of the consequences that can leave a hole in their pockets. Credit-card issuers here typically charge an interest rate of 24 per cent a year when full payment is not made by the due date and on cash advances. The good news is that official delinquency and default figures are not yet rising significantly, a check with Credit Bureau Singapore showed. Default accounts are those closed with outstanding balances or written off as bad debt, while delinquent accounts are those that are 30 or more days past due. Still, the fact that there has been no noticeable rise in defaults or delinquency does not mean things will not get worse in future, said the bureau's executive director, Mr William Lim. 'If employment numbers change, that will likely have an impact on delinquency. The situation will be exacerbated with low growth and if inflation figures are not contained. However, the impact will not be immediate and will likely take place only next year,' he said. The credit crunch is being felt in countries like the United States, where the national passion for shopping with plastic is taking a hit as card issuers cut back on card offers, tighten standards for applicants, and curtail sky-high credit lines they had splashed out for years. The New York Times reported recently that some lenders are even pulling credit lines after monitoring cardholders who shop at the same stores as other risky borrowers, or who have mortgages from certain companies. In Singapore, banks contacted said they are not doing anything of that sort yet. They added that they use a 'robust system' of credit processes and policies in assessing all credit-card applications. Citibank Singapore's head of portfolio management and sales, Ms Jacquelyn Tan, said the bank has always adopted a prudent approach towards lending. 'Any application for credit undergoes a rigorous credit review process that assesses a potential borrower's ability to repay,' she said. Mr Dennis Khoo, Standard Chartered Bank's general manager of lending, said the bank would work with customers who have difficulties in meeting repayments on a case-by-case basis. http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_297853.html
i'm not sure how they do the 24%. but i would assume it's compounded 24%. A = principle amount. so, the 24% would be A+(Ax24%)= Bthen the next would be B+(Bx24%)= Cso on and on..
Nov 17, 2008Credit card crunchMore seeking credit counselling as incomes start to fall in recessionBy Radha Basu, Senior CorrespondentCCS Counsellor Yong Siow Ying helping a client sort out loan repayments. The non-profit group is seeing more people turn up for advice on managing debts, and expects demand for its services to increase as the economy heads south. -- ST PHOTO: ASHLEIGH SIMTILL late last year, banking executive Lily Lim, 30, was living the high life, visiting fancy restaurants and splurging four-figure sums on frequent holidays and shopping sprees. Then as her expenses sprinted past her income, the relationship manager thought she would become a property agent to cash in on the building boom.The gamble failed.The property market stagnated suddenly. And her monthly income, which, buoyed by commissions, could touch $10,000 at the bank, plunged to $1,200.By April, her credit card debts mounted to $75,000 and she was unable to pay even the minimum sums.'I was in despair,' said the business degree holder who approached Credit Counselling Singapore to seek advice on how to rein in her debts.'I had no idea you could go from boom to bust so soon.'It is early days yet for the recession, but job woes have suddenly overtaken overspending as the key reason for mounting credit card debts, show numbers from Credit Counselling Singapore (CCS).More than 60 per cent of CCS clients this year cited 'job-related' causes as the biggest factor that drove them deep into debt, up from 43 per cent in 2006.Overspending was the main culprit in 57 per cent of the cases this year, up from 52 per cent in 2006.A non-profit organisation, CCS helps debtors work out monthly instalment plans to pay off credit card bills. It has counselled more than 3,000 people since it was soft-launched in August 2003 and 15,000 have attended its weekly talks on how to pay back ballooning debts.As the economy heads south, the numbers of those turning up for help at CCS are inching up. Nearly 600 attended the talks last quarter compared to 325 during the last quarter of last year.This month, the numbers are likely to rise further. The latest session, last Wednesday evening, for instance, saw nearly 80 attendees.Young and old, sharply-suited or shoddily-dressed, they listened quietly and took notes as CCS assistant director Tan Huey Min held forth on ways to work out payment plans with creditors.'Open mail from your creditors, answer calls, stop using the facilities and continue to pay whatever you can,' said Ms Tan.Fuelled by wanton spending, credit card rollover debt in Singapore ballooned by $296 million to $3.3 billion in the 12 months from August last year.That is a three-fold rise from the $94 million increase recorded in the preceding 12 months.Ms Tan said she and her colleagues are anticipating a bigger demand for their services as the economy worsens.CCS' head of counselling Lim Cheng Boon said a booming economy had caused many people to overspend in the past couple of years.'The sudden recession - where a client or a spouse can lose a job or face a pay cut - is making matters worse.'While most of the debtors are married and in their 30s and 40s, the number of spendthrift singles in the same age groups is also on the rise.One of his clients, who is 44 and single, had her pay slashed from $12,000 to $4,000 in July this year, when business slowed down for the lifestyle firm she worked for.Saddled with credit card debts of $288,000 - largely a result of her love of Louis Vuitton and luxury holidays overseas, lavish gifts for her extended family and interest - she landed up at CCS for help.'With the easy availability of credit cards, often people forget that they are spending not cash but credit that will need to be paid back soon,' said Mr Lim, who has counselled more than 500 debtors.'And with multiple cards, many don't know how much they spend every month.'Any change in income can be disastrous, as marketing executive Genevieve Lee, 33, learnt the hard way. She used her credit card and overdraft facilities to pay $30,000 for a distance learning course. Shortly afterwards, she lost her job.It took her nearly two years to find another job. By then, her debts had ballooned to $90,000. 'Since the economy was booming, I kept thinking I'd find a job soon,' she said. 'But I never did.'Ms Teo is now on a debt management plan (DMP), under which she pays a fixed sum of $1,900 to her creditors every month.During one-on-one counselling sessions, CCS helps debtors list out their income, expenses and surplus and work out how much they can afford to pay back the banks. Barring a few 'exceptional cases', like when a family member is seriously ill, the entire debt needs to be paid back in a maximum of five years.Telecommunications executive Lawrence Wong, 27, was at the CCS office last week seeking help with credit-card debts of $58,000 he chalked up in less than two years, largely as a result of Internet betting.'We have no money to lend - we are just a facilitator,' counsellor Yong Siow Ying, a retired bank manager, told Mr Wong.After a two hour session totting up her client's monthly expenses versus income, she worked out that he will need to fork out about $1,020 per month to pay off his debts in five years.Mr Wong, who is single, agreed to take on an additional weekend job. But it is not going to be easy. Since he is a relatively new customer, the banks may be unlikely to accept a five-year payment plan from him, warned Ms Yong, adding 'We are in no position to bargain.'But her client is determined. 'I made a birthday resolution to take charge of my debts,' he told The Straits Times. The economy, he pointed out, was not getting any better. 'So I must start soon.'(The names of all the debtors in this story have been changed at their request)radhab@sph.com.sg
did he said that? serious. haha.
Bad credit card debts 'will soar'Credit cardsThe number of credit cards in circulation has actually fallen, PwC saidBad credit card debts may reach as much as 9% of all outstanding balances by the end of next year, an accountancy firm has said."Bad debts in the sector have reached historic highs," according to PricewaterhouseCoopers. The figure stands at about 6% now.This is despite the fact that there has been a "cooling passion" for credit cards, with borrowing down 3% to £64bn.The number of credit cards in circulation has fallen by 8%, it said.The firm said that while UK consumers are borrowing less than before the financial crisis, debt levels in the UK remain high compared to the rest of Europe.As bad debts increase, PricewaterhouseCoopers (PwC) expects borrowing rates on cards to increase and annual fees to become more common in the market."At the higher end of the market customers will pay for access to premium benefits and at the lower end more marginal customers will be expected to pay for even a standard credit card," the firm said.Each UK household has total average debt of around £60,000, made up of about £50,000 of secured debt and £10,000 of unsecured debt, PwC said.The firm calculates the average household will need to spend approximately 15% of its income after costs and taxes "purely to service the interest payments" arising from these levels of debt.
Author
Topic: Credit (Card) and Credit Woes (Read 1750 times)
