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Budget 2010: Goodbye credit cards

Corrected at 3:25pm, 27 Oct 2009

I MUST say that Budget 2010, announced by Datuk Seri Najib Razak on 23 Oct 2009, contained quite a few surprises for better or for worse. And my observation is from someone who has pored through the government’s budget over the past five years.

Credit cards
(Source: babble.com)
For one, I’ll have to start picking up the phone over the next few weeks to cancel my many credit cards. An unwelcome announcement was that beginning 1 Jan 2010, we will be taxed for every card we own, regardless of whether we are or aren’t in debt. 

At RM50 per card, and RM25 per supplementary card, that’s probably enough to set me back at least RM700 per annum. Yes, I have indeed a whole string of credit cards, but thankfully without any debt attached to them.

I have had multiple credit cards since the days of running my own company. Trust me, they served me well as my short-term “Ah Long”. In times of crisis, such as the Asian financial crisis in the late 1990s, I dipped into them to pay my employees their salaries. It was an expensive loan, but it served as a reliable last resort and tided me over during the tough times. You can imagine how much time I spent filling and faxing “interest-free balance transfer” applications!

Such days are long gone, as I no longer have scores of employees to support. But I kept my cards, cancelled some and applied for new ones for different reasons. You see, I’m a sucker for ensuring I get the best deals. And now that retail outlets and services are literally embedded into credit cards, you want to own them just to make sure you enjoy maximum discounts or cash rebates. I’m sure the missus enjoys having the supplementary cards as well.

Favourite cards

My favourite is the Shell Citibank card, which gives me 2.5% cash rebate for all my expenses at the Shell petrol pump, regardless of carry-forward balance. Spend RM500 per month at the pump, get RM150 back per annum. What’s more, even for non-Shell fuel purchases, I get 0.75% cash rebate, credited into my account the very next month. That’s much better than most, if not all, credit card point awards, which are worth between (corrected) 0.40 sen and 0.55 sen per point (yes, I worked it all out), or up to only 0.55%. What’s more, you’d need to take the trouble to convert these points to gifts or vouchers, or even in some cases, cash.

If the card’s so good, why do I own others? Well, because they come with other benefits. I have the AirAsia Citibank card, which gives me the opportunity to do advance booking when there are promotions. This is especially useful for those crazy “Zero Fare” promotions. Then there’s the HSBC card, which offers fairly attractive discounts at many food and beverage outlets — 10% off at Starbucks, no less. 

And then there’s the Maybank American Express Card, which gives you two or five or 10 times the reward points at some of the most popular shops and restaurants. This means a rebate of up to 5.5%. Or a further discount of 20% for “on sale” items at stores like Metrojaya.

There’s more, but you get the idea. You may argue that I get charged annual fees for these cards as well. But if you make the effort to call the bank and threaten to cancel the card, these fees will just get waived.

Govt earns millions

As of August 2009, there are about 11.1 million credit cards in circulation in Malaysia, of which approximately 88% are principal cards, while the rest are supplementary. Assuming the status quo, that’ll work out to a substantial sum of RM520 million in additional taxes to the government. For a government that’s short on cash, I suppose everything counts.


Snip, snip (Pic by stangot / Dreamstime)
The Finance Ministry has claimed that the government is concerned about credit card debt, and we should be. But to quote a blogger, Lee Wee Tak: “If you want to control credit card debts, more effective measures would be to impose stricter guidelines on qualification, credit limits of cardholders and limit the number of cards held. Not by increasing the financial burden of all cardholders, whether they are having a debt problem or not.”

But for now, the time has come to say goodbye to some of my favourite credits cards. Sob!


Tony Pua is Member of Parliament for Petaling Jaya Utara under the DAP. He is the DAP national publicity secretary, as well as the investment liaison officer for the Penang chief minister, based in the Klang Valley. He loves his credit cards.

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30 Responses to “Budget 2010: Goodbye credit cards”

  1. Bernard says:

    Will this spark a credit card “goodies” war to “help” customers decide which bank’s card to retain?

    I would just retain one.

  2. emmie says:

    Great, now supermarkets and department stores will have to hire additional security as more people pay in cash.

    A government that is going digital will force millions off the net as they will no longer use Paypal and other online booking/payment services.

    The government can also look forward to more deferred consumption, putting a damper on domestic demand and the government’s stimulus efforts.

  3. goodGov says:

    That’s a good policy.

    Korek …. korek ….. korek …… korek ^_^

  4. alktn says:

    Pua, not to worry, since you are such a valued cardholder, most banks will probably say, don’t worry about the RM50 service charge, if we can waive the annual fee for platinum card of circa RM300 – RM600, what is that little RM50? We may as well absorb it to keep you as [our] cardholder..

  5. Tee CS says:

    Brother, you have my say on that. I will be making a call soon to the Direct Access company to cancel all my credit cards.

    Well, who am I to say that it’s a stupid idea to impose charges on the cards when the latter has been so good a servant to me. ..? Problem lies that those guys [and gals] sitting [on] top always think that they always know something better than the people…..well….what can we do about it except…..see you in the coming GE, my message will then be conveyed.

    Budget for the people …as always the dutiful headlines [in] the mainstream newspaper. Maybe, [...] to those in the cabinet, we are only the maids.

  6. Nicholas Aw says:

    Fire is dangerous. Ban fire! Water can cause floods. Ban water! That’s precisely what the government is doing. Some irresponsible card holders cannot manage their credit with the credit card issuers, so impose a blanket RM50 per card tax on all credit card holders. This is [...] absurdity of the first degree.

    Even as a pensioner, I have five credit cards which I obtained while still in service. I do not have to explain at length but everyone is aware that there are more advantages than disadvantages of holding credit cards. Imposing a RM50 tax will not deter people from applying for credit cards and spending too!

    A better way of regulating the credit card industry is to impose strictly credit card eligibility by making sure that credit card issuers issue cards for those who can afford to use them. To be fair to other wage earners who may want to apply for credit cards as they are a cashless convenience, a lower credit limit could be allowed for this latter group of people.

    Please Mr Finance Minister, rescind your directive which should not have been included in the Budget in the first place. I believe that your officials in the Finance Ministry have ill-advised you on this matter.

  7. roastpork says:

    Wah, you are so kiasu-lah, Tony.

  8. Azizi Khan says:

    Tony, I agree with you. It’s time to move away from credit cards. I used to have three of them with a total credit of AUD35,000. I cancelled them all. Now I have one National Australia Bank Velocity card — with a limit of AUD2,000 and I get frequent flyer points on Virgin (and Malaysian Airline) flights.

    Its not that I can’t afford it. But years in the financial services sector made me realise that banks and financial institutions WANT you to be a debtor.

    They make money from debt. Having money in the bank doesn’t do much. But having debt makes money for them. See if you have a cards worth $35,000 that’s the amount of interest they make on your card – even if you don’t use them, through various surchages.

    This is why companies are tripping over themselves to give you credit. They want you to spend. They want you to be in debt.

    This is also why the the rich get richer and the middle class and the poor are stuck in debt. We have moved from having cash in hand to a world where “we could potentially have cash”.

    So if you want to get out of the rut :
    - cancel as many cards as possible.
    - remove cards that don’t provide benefit.
    - choose the lowest interest best value cards.
    - use cards as a nice-to-have, not mandatory.
    - shop around for best prices.
    - buy only what you need.

    One more thing, I noticed when I was in Malaysia that most merchants charge a certain percentage as a fee for using credit cards. Do not fall into this trap. The charge is supposed to be a charge for the merchant, not you. They shouldn’t pass it to you.

    Mark my words, to encourage the sale of credit card applications, most credit card vendors will find a way to “absorb” this new tax or pass it to you in a way you will not notice. Very few card vendors give you any real value for the cards they provide.

    CTOS, Malaysia’s leading credit mis-information organisation is excellent at providing outdated credit information for sale. Should you cancel credit cards, please update your information with CTOS, or it might affect your future loan application.

    Bottom line, nothing beats having cold hard cash in your bank account. It’s just a choice between lifestyle and prudent spending. When I found that I was spending too much time going out, I confined myself to a self-imposed exile. The result, my bank balance was AUD10,000 healthier.

    Do what works for you. But the reality is too much credit is bad. Najib’s idea of imposing this tax is a silly idea; consumers have to be smarter. It’s your money you’re voting with.

    I will also leave you with this website : http://www.creditcardscompare.com.au/

    Its an Australian site that compares all the cards on offer here so people can make informed choices. I am not sure if there is a similar Malaysian site but the point being find something that matches your requirement.

  9. henny penny says:

    I could not agree more [with] Lee Wee Tak. If the government’s intention is to curb credit card debt, then stricter measures and conditions are necessary for card issuance. If however the government’s intention is to earn more money, this is the clear way.

  10. Pratamad says:

    Can’t agree more — address the root cause, not the symptom.

    I think card-issuing banks are equally hurt — they spend substantial amount of effort and money to acquire new card customers, only to have tonnes of cancellations to handle in the coming two months. Banks should revolt, just a small note. :-)

  11. saripah says:

    Suggest you summarise each Budget 2010 provision with comments whether [they] actually fit in with the 1Malaysia jingle…”Rakyat didahulukan”?

  12. Tony Wong says:

    This is really a ridiculous move by the government to impose tax on credit cards. I agree that if the government really wants to curb debt problems among credit card users, it should [do this] on a more mature level such as suggested by Lee Wee Tak. Imposing this tax is only a burden to the middle-income group. People who are already in debt with credit card companies and [who cannot] settle them before 31 Dec 09 will have to pay these taxes. This will only make their lives even more pathetic. Imagine [you have debt on eight cards] and [for] which every month you [pay] the minimum payment. Now extra RM400 goes to the government. Does this help?

    There are more ways to generate cash rather than sucking from the people…. sihh!

  13. sywong says:

    ..it’s just another bankrupt idea from a bankrupt government to fill up its empty coffers…

  14. megabigBLUR says:

    Having a lot of credit accounts requires a lot of organisation. You need to be aware of how much debt you owe, and not just like “Er, around RM 2K liddat”. Some kind of written record, whether the old-fashioned way on paper, or on a computer, is essential if you don’t want to dig yourself into a hole that you can’t climb out of.

  15. Yup, just like what we did.

    I cannot understand why we can’t do something right to heal the economy instead of lame-brained ideas like this.

    Then what happened to the “Service Tax” which was being collected for the last 15 years or so?

  16. Sam says:

    I am a retiree. The credit card comes in useful when I pay my bills. This saves me the hassle of carrying cash around. I can also use my card when I travel and pay my hospital bills upfront. Imagine me carrying 5K to 8K to the hospital to pay my medical bills. The government should at least allow the first and second card free of charge. Now I am in a more difficult position because I have to have cash on me always and this will give the snatch thieves and parang-wielding guys a field day. So much for 1Malaysia and a caring government. I wonder who they really care for!!

  17. Tan says:

    It’s true the present ruling government has run out of money, so naturally they turn to the “rakyat” for rights issues (this is a stock market term to raise money from shareholders). To say the imposition of the service tax will subject the people to more prudent spending is mere nonsense and too simplistic. In addition, the imposition of 5% real property gains tax irrespective of the tenure of ownership is completely unacceptable and equivalent to daylight robbery of our hard-earned money. Do bear in mind that interest on loans taken for these properties are not tax deductable and the final payment for RPGT could be quite substantial if it had been purchased a long time ago as property generally appreciates in value over time.

  18. Shoba says:

    Mr Pua,

    Reading a Bernama report I read that it’s RM50 per annum, not RM50 a month. Please validate?

    ======================================
    @Shoba

    Yes, it’s per annum. But what’s the confusion? Tony didn’t say it was per month.

    Jacqueline
    Editor

  19. james jame says:

    I support and salute you and I think I will do just the same before BN bankrupts us with their [...] charges while claiming the Budget to be people-friendly. “Rakyat Didahulukan Pencapaian diutamakan”. 1Malaysia.

  20. SC says:

    Alktn: You are right, the government’s target is the banks, not the poor consumers.

  21. crap says:

    [...] We always have debit cards. What sort of purchase can’t you make with a debit card? Please don’t spend money you don’t own.

  22. Paul Lim says:

    I’m on the band wagon: [I'll] soon return my cards and supplementary cards that are not in use. Who is to be blamed — the banks or the regulatory authorities?

  23. siew eng says:

    Money talks. Especially when it cuts one personally. Look at how many comments this story generated!

  24. uncle husim says:

    Wow, what a way of abusing your credit card to the max, Tony. It makes me believe that despite the RM50 tax, you still reap a lot of benefits. And yes, they should make qualification for credit cards stricter.

  25. Nani Cheras says:

    Banks should then do away with the yearly fees, only RM50 govt tax will do. After all, the interest earned from cardholders should covers the yearly fees.

  26. Farouq Omaro says:

    The credit card is needed by many people who are not rich. There are times where we have to use the credit card.

  27. Trixie says:

    Oh my gosh, it physically hurt to know your short-term Ah Long dependency on your credit cards! However, it’s admirable that you did not leave your employees to beg on the streets.

    I have financed my education in the past on credit cards. And when trying to go cold-turkey, I froze then smashed away at the ice block to release my precious card (perhaps to pay for my electricity bill, I can’t remember!).

    I am still paying for those days. And I am on a new study mission again, but minus the plastic.

    Life is less surreal for sure. Nowadays, I look for pennies under the seats without fail. Obviously, the real paper money in my purse means no free-flowing retail therapy of any kind can be had!

  28. Lee Wee Tak says:

    Other implications our dear PM never thought of:

    1) It deals a stunning blow to credit card companies. For Maybank, HSBC, maybe not too bad as their core business been diversified into commercial and consumer banking. But for MBF, which does not own a bank and hence is purely a credit card company, imagine what kind of blow this is to them!

    2) When the number of cards goes down, banks would need to maintain their profits either by increasing their charges to merchants or reducing the benefits available.

    3) Consumers would lose their bargaining power, choice and ability to plan purchases. Gone will be the days when one could have a different card for different benefits and purposes.

    So much for creating a high-income, innovative and competitive economic environment.

  29. Lee Wee Tak says:

    Oh yeah, by wiping out RM400 to RM500 million from consumers, imagine the multiplied impact on consumption. Again, the living standards of the rakyat and the potential business of retailers, hawkers, etc. have all gone up in smoke.

  30. alan tan says:

    I’m going to cut my credit card as well.

    Why is the govt taxing something that is given FREE?


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