Credit cards, with its convenience and high amount of rewards, continues to be the preferred payment method over cash, bank transfer and e-payments in Singapore.
According to the Global Payments Report by Worldpay, this is especially true for online purchases, where credit card had a 67 percent share of all payment methods.
And with the rising popularity and frequent occurrence of online sales events such as Black Friday, Singles Day and the upcoming 12.12 event, this meant that credit card usage has soared through the roof.
However, more credit card spending, coupled with the rise in interest rates started causing some undesirable situations such as the rise in bad credit card debts.
Rising Credit Card Debt
Kuo Huo Nam, Chairman of Credit Counselling Singapore noted a disturbing trend — that is the rise in credit card rollover balance, with $5.6 billion at the end of September, which is not far from the all-time high of $5.8 billion.
This trend is also showing up in bad credit card debt. Monetary Authority of Singapore data showed that bad credit card debt (“written off debt”) has risen to $27.9 million in March this year, which is only four percent lower than last decade’s peak.
According to Yahoo Finance, this is mainly due to two reason — an increasing reliance on credit card usage and the rise in interest rates.
Credit Card Usage and Interest Rates Increases
The fight for market shares amongst banks has led to attractive rewards for credit card usage. Coupled that with the convenience brought by innovation from contactless payment, it is no wonder that Singaporeans are increasing their use of credit cards.
This has led to an increase in total billings per card to $500 — an all-time high in Singapore — which inevitably caused the rise in credit card rollover balance.
When you combine that with the hike in US Fed rate, it just means more debtors in Singapore are going to find it harder to repay debts.
How to Manage Your Credit Card Debts
With this in mind, it would be best not to default on your credit card loan and let it roll over month to month, as it could become an astronomical amount that might just be impossible to clear off.
If you have the habit of missing payment due to the sheer number of credit cards that are in your wallet, it might be time to evaluate all the options and decide which are the ones you really need on a daily basis.
Lastly, you can also make use of finance apps available on both the Play Store and App Store to track your finance so you will always know how much you have spent for the month right at your fingertips!