Credit card spending on the rise

By LYDIA NATHAN

Credit card spending is on the rise as consumers turn to the plastic to pay for big items, while salary increases slowed and companies are less lavish with bonuses and other monetary incentives.

Total credit card outstanding stood at RM35.9 billion through May this year, but lower than the RM36.7 recorded at the beginning of the year, according to the central bank’s figures.

There are about 8.4 million credit cards in circulation up to May this year, higher than the 8.2 million cards recorded at the end of January 2017.

A general survey by The Malaysian Reserve (TMR) showed three out of five people still prefer to use their credit card despite uncertainties over a salary rise.

“If there was an item on sale and I thought it was a good buy, I would use my credit card,” said Debra, an advertising agent.

Consumers also repaid almost RM11 billion in their credit card spending as of May this year, with non-performing loans (NPLs) related to purchases with the plastic at RM473.3 million as at end-May.

Credit card debt outstanding is small compared to hire  purchases at RM167.9 billion, housing loans (RM465.4 billion) and personal loans (RM40.9 billion).

Malaysia’s total outstanding NPLs stood at RM25.6 billion from the country’s banking outstanding loans of RM1.54 trillion.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said consumption via credit card has risen 2.6% in May compared to the same month a year ago.

Mohd Afzanizam says consumption via credit card has risen 2.6% in May compared to the same month a year ago (Pic by Ismail Che Rus/TMR)

“In January, total outstanding balance for credit cards has risen by 1.1%. So, consumptions have increased,” he told TMR.

According to Bank Islam research, local card holders’ domestic purchases rose 6.5% year-on-year (YoY) in May to RM8.9 billion, while domestic purchases by foreign card holders jumped by 24.7% YoY to RM823.3 million.

The number of total purchases made with credit cards in Malaysia reached a high of RM9.3 billion in May.

Credit card outstanding had been at a RM30 billion range since May 2012.

Total credit card outstanding should be higher as many banks asked customers to take personal loans to repay their credit card debts at lower rates.

Personal loan debts have also risen from RM36.8 billion at the start of 2015, to RM40.9 billion for the months through May 2017.

Besides expensive items, the surge in online transactions are pushing the use of credit cards.

11street, an e-commerce operator, has reported a surge in its online retail activity.

Its CFO Chuljin Yoon said people who spend online using credit cards are constantly looking for ways to stretch the ringgit, including making comparisons of prices online and gathering points for loyalty systems.

A recent survey by United Overseas Bank Ltd showed Malaysian millennials (below the age of 30) are the main movers pushing online shopping by 38% in the first-and second-quarter of last year, with a growth spurt of 1.4 times more than any other age group.

Most millennials use credit cards to purchase airline tickets and book accommodations while travelling. Luxuries such as fashion items and smart devices are also on the list.