The banks have spoken.
For the past few years, the banks has been spending millions of ringgit to acquire plastic subscribers. There is no doubt that the credit card department is the most profitable channel for most of these banks. Regulations on approving new cardholders has been surprisingly lacking, which resulted in the need for the government to set up debt management agencies such as the AKPK. A fire-fighting approach I’d say, but it’s better than not doing anything to the rising problem of high-interest credit card debts faced by many Malaysians today.
Now, in the tabling of the 2010 Budget, our beloved PM announced the infamous RM50 service tax on all primary credit card holders, and RM25 on supplementary card holders. It’s easy to see that such a move will indeed be very ‘taxing’ on the plastic population as a whole but the plastic issuing banks are very unlikely going to let their subscribers cut up their cards and leave just like that, just when they are starting to milk the insanely profitable interest and floats after spending a fortune acquiring them. Another way these credit cards are profiting the banks is through the swiping terminals they offer to the business community. It’s quite a common practice these days for the merchant banks (the bank that provided the credit card terminals) to hold the payments for up to 45 days. Imagine the amount of transaction (float) they hold in their coffer, and then imagine the interest accruing for the 45 day period which goes straight into the banks pocket. No, they don’t laugh their way to the banks, they are already having a party right inside ;-)
I still don’t think anyone would need more than 2 credit cards, unless you are a collector. But if you are holding many cards, rest assure that the banks are going to come up with something to offset your ‘losses’. They are used to paying RM100 or more to these credit card agents to sign you up!
As ironic as it might seem, the banks are being robbed (estimated about RM520 million) under broad daylight. Ouch!
(THE EDGE MALAYSIA) 7th November 2009, KUALA LUMPUR: The Association of Banks in Malaysia (ABM) is advising credit and charge card holders not to make any “hasty decisions” in terminating their cards as the mechanics of the imposition of service tax are still being formulated.
“Whilst details of how the service tax will be imposed are being finalised, cardholders should continue to use their credit and charge cards wisely to enjoy the many benefits that the cards have to offer as a payment instrument.
“Cardholders are thus advised to avoid making any hasty decisions in the meantime. Banks will inform their customers as soon as details are available,” ABM said in a statement yesterday.
It said banks were prepared to assist the relevant tax authorities as best they could in the smooth implementation of the imposition of service tax on cards on Jan 1 next year.
“It is understandable that the imposition of the RM50 service tax a year on each principal credit card and charge card as well as the RM25 service tax a year on each supplementary card has raised many concerns of affordability on the part of cardholders.
“In the short time following from the announcement of the same, commercial banks, together with the other card issuers, have acted swiftly to assess the thrust of the measure with the aim of better pre-empting any issue which may arise in connection with its rollout and apprising the tax authorities,” ABM said.
The association also said it would enhance and promote its consumer education programmes designed to inculcate stronger personal financial management skills among cardholders.
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