Educate consumers on avoiding credit card debt

credit-cardPETALING JAYA: There is a need for more education on the consequences of getting into credit card debt, especially among youths, says a financial expert.

Financial adviser Eno Wong said education is the key to help people understand the ills of getting into serious debt, as that could possibly help reduce the number of bankruptcy cases.

“Especially for young Malaysians, better education on spending and the problems that come with credit card debt could make consumers wiser,” he told FMT.

Wong was asked to respond to a statement by Deputy Finance Minister Lee Chee Leong in the Dewan Negara yesterday that only 43.6% of card holders settled their credit card debts in full from January to June this year.

“Another 43.6% paid at least the 5% minimum payment during the same period. The remaining 12.8% failed to pay the outstanding balance or the minimum payment before the payment due date,” Lee told the Dewan Negara.

He also revealed that 845 individuals, aged below 30, were declared bankrupt in the first half of the year, arising from outstanding credit card debt.

Wong said he does not think that the number of bankruptcy cases among youths is high though.

“It is not a big figure if you compare it against Malaysia’s total 31 million population.

“But without better education in wealth management, the figures will probably grow bigger,” he said.

Another financial adviser, Robert Foo, said stricter rules in issuing credit cards could reduce the number of people defaulting in payments.

He said it was the government and bankers who set the rules on who could get these credit cards, and so they should do something to deal with this problem.

Foo also agreed with Wong on the need for education to ensure more youths don’t fall into the debt trap, while also learning good financial management.

Meanwhile, a survey conducted by Asian Institute of Finance (AIF) showed that there is an unprecedented level of debt accumulation among Malaysia’s millennials.

It showed that young people are experiencing significant financial stress early in their life, with many living beyond their means and trapped in emotional spending.

The study also showed young Malaysians were relying on high-cost borrowing with 47% having excessive credit card borrowings.

3.6 million credit card holders in Malaysia as of June