PETALING JAYA: While credit cards were designed to provide people with convenience and purchasing power, the worry is that cardholders may not be able to maintain restraint in using such privileges.
Financial experts and lawyers said imprudent use of credit cards could push people into debt, potentially contributing to the rising bankruptcy rate.
Lawyer Fahri Azzat said the desire to project a successful image of themselves in society has pressured many to obtain credit cards to purchase branded items, including expensive cars and gadgets.
He said chasing a lifestyle beyond one’s financial means would result in debt or possibly bankruptcy if one fails to remit the monthly payments on time.
“Among the difficulties are the culture and values that we have. We are now in a system where we are all expected to get as much as possible. We buy expensive phones, all the latest gadgets and expensive cars so that others will think we are successful.
“Sometimes, credit cards put you in a situation that you cannot get out of. When someone earns RM1,800 a month and gets a credit card with an RM4,000 spending limit, how is that person going to get out of the debt?
“At the end of the day, his debt is RM4,000 while his salary is RM1,800. It’s the value system that drives us this way. We (regard highly) people who have a lot of money,” he said.
Another lawyer, S. Muhendaran, suggested banks conduct due diligence on loan applicants.
“They should check the financial background of applicants to determine whether they can repay, since most of the applications get approval within 24 hours.
“When banks approve personal loans or credit cards, they must make sure that the individual is capable of repaying.
“If they default for two months, loans can be recalled. When individuals refuse to pay their debt, then the banks will initiate legal action (that may lead to) bankruptcy,” he said.
Financial expert Felix Neoh advised the public to ensure they have enough earning power to clear their monthly instalments before making financial commitments, to avoid being declared bankrupt.
He also urged the government to develop effective financing policies that would serve the purpose.
“It is true that lenders are pushing to grow their balance sheets with more lending. But only those who can afford it should be able to access loans.
“The government should play its role by reviewing the lending policies, where only those who can make repayments should have access to such credit,” he added.
“Nevertheless, the public should also practise self-evaluation and consider travelling by buses and trains or at least purchase a car that fits their income.”