Credit Cards and Malaysia’s recent budget 2010

Dear current ruling government of Malaysia,

I see you’ve decided that it would be wise to charge a RM50/year credit card tax, on a per card basis, while charging the supplementary users RM25/year. Your opposition says that you will thus make RM400 million a year in revenue, just from these fees alone.

Some are however convinced, that though you slap a tax on us credit card users, most banks will probably absorb the charges to hold on to customers. But you don’t like it, because the tax, is meant to promote prudent spending.

Now, let me tell you my opinion, as a person who liberally uses his credit card for every purchase he can use it for, because he’s kiasu to get rewards points. To boot, I also settle all my bills on time, in full. And I also have business interests, in where credit card transactions are crucial. </disclosures>

First up, the rakyat aren’t stupid. Please do not think you’re smarter than them. Telling the rakyat for example, that the EPF is the be all and end all, is just silly. Telling them that they need at most “two cards”, is no better, my friend.

Promoting the online economy
Limiting credit card transactions, harm the economy. As more and more people are getting broadband Internet access, more and more people are choosing to purchase online. Today, you can buy air tickets, groceries, cameras, services and clothes online, all thanks to a credit card. By imposing a fee, you are potentially harming the online economy, and this is not in tandem with the MSC, at all.

Discounts galore
Credit card companies like to reward their cardholders. HSBC for example, regularly rewards you in the MidValley and Gardens shopping malls. CIMB is currently rewarding shoppers at Pavillion. American Express regularly has some dining places on its rewards list. These lists go on for many banks, including Citibank, UOB, etc. These are 10-20% discounts, which mean a lot to the average Malaysian.

This encourages you to carry more than one credit card. If I may be allowed to put on my kiasu hat again, I’d like to say, this is exactly what I do. I patronise places, where I know I can get a discount. Or where I know, that if I spend RM50 on food, I get a free dessert valued at RM15. I want my ringgit to go further, and I’m sure the rest of my Malaysian friends do, too. Today, I almost always exclusively buy coffee at Starbucks with a credit card, because everything I sign off, is 10% cheaper.

No fees
Credit card companies like Citibank tell me that they’d like to slap me with an RM600 yearly fee for my credit card. I got off a plane, and at about 2.30am, I called their call centre, and told them I’d like a waiver. They did just that. Do you honestly think they’d like to charge me RM50, when they’d just waived RM600?

HSBC tells me I get my Visa Platinum and Gold MasterCard, free for life. I have a hefty limit on the Visa Platinum, and almost never use the Gold MasterCard (not many places today only accept MasterCard, thankfully). Do you think I will be cancelling it if I’m slapped with an RM50 fee for something I almost never use?

Public Bank likes to give me credit cards that are free too. To boot, they give me a 0.7% rebate for every ringgit spent. Now, remember, I am kiasu, and I like seeing my rebates. Would you honestly think I want to spend RM50 of it, on fees? (make that RM100/year, for both Visa and MasterCard).

Quick math tells me that I’ll have to spend nearly RM15,000 just to get my cash back, to pay the government.

Incidentally, a lot of banks throw credit cards against those that hold a loan at their bank. They are free of fees. Should they also now be slapped with an RM50 fee?

Electronic transactions are safer
I lived in Australia for many years. There, you can pay for everything, from a 5-dollar latte to a 100-dollar taxi ride, using your bank card, via EFTPOS (Electronic Funds Transfer at Point Of Sale). There are lofty goals with MEPS in Malaysia, but its just not widely used.

However, credit cards are widely used and available. No, I still can’t pay for a taxi ride, and we’re very far behind in comparison to Australia, or our little neighbour down south, Singapore, but at least, we’re getting there.

Charging fees will probably hamper the use of electronic transactions. I have a dream, that when I go to a mamak stall, and order myself a roti telur (double telur!), and a teh tarik, I can use my credit (or debit) card, and pay for it.

Malaysia has always aimed to be a modern society, and if we can go cashless, we’ll be safer. Crime in Malaysia is already so high, and the last thing we need, is further encouragement from the government, for people to deal in cash transactions. The more we can move to electronic transactions, the better.

Donning my business hat
Today, the average Malaysian probably buys a lot of things on these wonderful “easy payment schemes”. You take the item home, and pay for it, with 0% interest, over a period of 12-24 months. This is how people get a snazzy television, a new laptop, or a massage chair. Having less credit cards in circulation, means people potentially buy less stuff. Are you not hampering the economy, this way, as well?

One more thing…
As a frequent traveller, I can for one tell you, that the Malaysian Ringgit, is not worth very much. 1 Euro is about RM5, and 1 USD is about RM3.50. Visiting Australia, sets it at 1 AUD being about RM3, while just going down south to Singapore, 1 SGD is about RM2.50. We had a 1:1 currency with Singapore, not long ago, but this “basket peg”, has really undervalued our currency.

Travellers need more credit cards, plain and simple. What are the other options? Carry a boat load of cash, and lose it at a tourist spot? Travellers cheques, are going out of fashion, like you wouldn’t believe. And the glorious Malaysian ATM cards stop working from midnight-6am Malaysian time (yes, you have to time your withdrawals overseas). And that 6-digit PIN number, tends to not work, in countries where PINs are 4-digits long.

In conclusion
Don’t assume the rakyat to be dumb. They can plan for themselves.

Start an advertising campaign. A Flickr user, Liyin, can help. That image is off to a good start (not CC licensed unfortunately).

Don’t assume the lenders (banks) to be dumb, either. This isn’t America, and the banking regulations are a lot stricter. Credit cards usually give you a 2-3x salary limit. They ask for papers (salary slips). The banks know how much debt you can handle. Wouldn’t it be better to impose on banks to say, “no to 3x salary, but 2x salary”?

I want to see online transactions take off. And the solution is not online bank transfers (RM2 GIRO fee applies). Its credit cards.

Please don’t hurt the rakyat from spending.

Photo credit: LiewCF on Flickr.