On 27 October 2016, a member of public, Mr Vincent Ong Kok Lam posted a letter in the Straits Times titled ‘Review minimum salary requirement for credit cards’.
Mr Ong’s son had struggled to pay his credit card bill for a long time and finally, he paid his son’s bill and took his card away. However, he later found out that his son got a second credit card from the same bank and had racked up a substantial bill which is beyond his monthly salary.
As a concerned father, Mr Ong wrote to the bank; he asked the bank why a second credit was issued, while he has bad credit rating due to his inability to pay his past bills.
But the bank answered it could not disclose the reasons, for confidentiality causes.
Mr Ong appealed to the government in his letter to Straits Times, to do something about income eligibility for credit cards before ‘we become a nation where young adults live on credit, resulting in unnecessary social and family problems’.
Responding to Mr Ong’s letter, the Monetary Authority of Singapore (MAS) issued a press release today (2 Nov), reiterating that it has set the minimum annual income requirements for credit card at S$30,000 for individuals below 55 years old.
MAS explained that in setting the eligibility at this level of income, it has to balance several objectives. “The aim is to provide eligible individuals with a convenient mode of payment and access to short-term credit when they need it, while encouraging prudent borrowing and lending practices,” MAS’ statement said.
“To minimise the risk of cardholders borrowing beyond their means, the maximum amount of credit that each financial institution can extend to a borrower is capped at four times his monthly income.”
This is meant to limit applies regardless of the number of credit cards a borrower has with the same financial institution, MAS wrote.
Further, MAS stated, “There is an industry-wide borrowing limit on the amount of unsecured credit that all financial institutions can provide to the same borrower. The limit will be progressively tightened to 12 times the cardholder’s monthly income by June 2019.”
“In addition, financial institutions are required to conduct fresh credit bureau and income checks on borrowers, when they receive applications for new unsecured credit facilities or credit limit increases,” the press release said.
“They must also conduct such checks where there are signs of potential debt problems. These checks will help financial institutions to decide whether to extend credit to the borrower, or make adjustments to any existing credit granted,” MAS finished the statement.
However MAS’s response did not seem to have answered the question of why the bank issued a second credit card to Mr Ong’s son.