A matter of life and debt

A matter of life and debt

There's a credit card here for every man, woman and child.

Yes, about five million credit cards, with a rollover debt of around $4 billion.

And about one in five credit card holders has been rolling his debt for three months.

The data comes from Credit Bureau Singapore (CBS), which collates personal credit histories to help financial institutions assess individuals before they give out a loan.

Take Mr Tan for example.

Last year, the 54-year-old owed $218,000 from having used 12 cards to roll over his debts.

"At times when I don't have enough, I only pay the minimum amount. The danger is that sometimes when you get too busy, you don't really take stock," the father of two told The New Paper.

"It creeps up on you until one fine day, when it gets too much to handle."

Mr Tan, who declined to give his full name, is one of more than 250,000 people who have let their debts revolve for three months and are sitting on a financial time bomb.

A CBS spokesman said that out of this quarter million, those in the 35- to 39-year-old age bracket featured most prominently.

But it is not just credit cards.

Unsecured loans

Debt from unsecured loans including overdrafts has risen over the years.

The average principal sum borrowed per consumer went up from $8,887 in 2008 to $12,678 last year.

And as of the middle of last year, more than 60,000 unsecured credit customers had not made a minimum payment in two months.

Like many, Mr Tan, too, found himself falling back on repayments.

He said his troubles started about 10 years ago, when he made some bad decisions on an engineering business.

"Some debts had to be settled after the engineering business folded. I used some cards to settle the transfer of funds and took some loans," said Mr Tan, who is married with children.

That formed the initial bulk of money he had to repay.

A month after his business folded, he found a job in another engineering company, at management level.

"I was never worried about finding a job because the line that I'm in, what I do, requires high technical expertise and experience," he said.

But that did not solve his problem of the snowballing credit card bills.

"I'm pretty good at what I do, but when it comes to finance, things seem to go haywire," he said.

With a "significant" dip in his salary, the sole breadwinner tried to continue providing for his family while sitting on a "time bomb that was waiting to explode".

But some things had to give. This meant fewer restaurant meals and overseas trips.

Swamped with work at his new job, Mr Tan said he lost track of how his debt snowballed.

"At times when I didn't have enough, I only paid the minimum amount. The danger is that sometimes, when you get too busy, you don't really take stock. It creeps up on you until one fine day, when it gets too much to handle."

That was exactly what happened to him.

It took a hospital stay in 2012 due to infection for the diabetic patient to put things into perspective.

Sought help

Overwhelmed by the stress and the frustration of dealing with calls from various banks about his debts, Mr Tan finally decided to seek help.

This cannot go on, he told himself.

Last year, after attending a two-hour information session, held weekly by the Credit Counselling Singapore (CCS), a counsellor helped him work out a debt management programme.

"I was made to list out all my debts, expenditure and earnings so they could work out something for me," he said.

Only then did Mr Tan break the news to his family.

"(My wife and kids) don't know the full details. My wife was a little shocked that this happened, but she trusted me to find a solution," he said.

Once bitten, twice shy. With about six years to go after a year into repaying his credit card debts, Mr Tan now sticks to a cash-only policy.

He tries to restrict his Nets transactions so that he can track his expenditure as much as possible. As for the 12 credit cards he used to own, they are now useless pieces of plastic.

His biggest indulgence these days is the occasional cup of $5 coffee.

"What you have is what is in your pocket. That's the best way to control your money," he said.

How people fall into a debt trap

More people have been asking Credit Counselling Singapore (CCS) for help to deal with their spiralling debts.

There was a 14 per cent increase in the number of people who approached the agency last year compared with 2012, said CCS general manager Tan Huey Min.

The CCS helps people with financial problems by conducting weekly two-hour information sessions which touch on things like a self checklist for people in debt traps, the dos and don'ts when it comes to credit card debt, and where to seek help.

Ms Tan said the problem starts with people charging purchases that were formerly out of reach to credit cards, or taking loans as a form of supplementary income.

Then, slowly but surely, they start rolling their debt, thinking they can pay their bills off slowly while making new charges to their cards.

"The person may think he can just apply for another card and use it to pay off the existing debts. That is how one falls into a debt trap," said Ms Tan.

Interest is usually charged at two per cent per month, or compounded to more than 26 per cent per year.

"Generally speaking, there are people who may be very naive in thinking that as long as they can pay the minimum amount, they are doing fine.

"One possibility why they don't pay the full amount is that they think they can save the money. Usually, they end up spending it," she said.

Then there are those who ignore the warning signs because they are afraid to face them, she said. The wake-up call usually comes when people realise they cannot even afford the minimum payment of the bills they chalk up.

But it is never too late to get out, Ms Tan said.

"As long as you realise that you need to do something, and you actually do something, there is always a hope.

"It's only when people refuse to acknowledge that they need help that it becomes problematic," she said.


Get The New Paper for more stories.

This website is best viewed using the latest versions of web browsers.