Credit card holders to spend more on bill payments
Urip Hudiono, The Jakarta Post, Jakarta
Credit card holders may have to start setting more aside next month in order to pay their monthly accounts, along with their other regular expenditure that has risen due to the recent surge in inflation.
This is especially true for those who usually pay only the minimum-allowed amount on their accounts, as credit card issuers gear up to fully comply with the central bank's requirement for a minimum monthly repayment of at least 10 percent of outstanding debt by December.
"I guess I'll have to start spending less with my credit card then, or I may not be able to afford to pay all my debts," said Cindy, a 27-year old who will be among those affected by the new regulation.
Cindy, who earns about Rp 3 million (US$300) a month, can run up a credit card bill of some Rp 5 million each month -- once, even Rp 10 million. As a marketing employee, Cindy needs good clothes when meeting up with her customers.
With the previous minimum payment of 5 percent, Cindy usually paid about Rp 250,000, before paying up the rest of the bill later on a monthly interest rate of 3 percent when she got some extra money.
"But if the minimum payment is now set at 10 percent, then I'll have to pay at least Rp 500,000," she said.
"Meanwhile, I still have to pay the rent, my phone bill, and installments on a house I am buying on credit. Prices have also gone up lately, so I really have to watch my spending more carefully from now on, or expect a debt collector to come knocking on my door."
On concerns that the unsecured nature of credit cards might raise the banking sector's level of non-performing loans, the central bank last year issued Regulation No. 6/30/PBI/2004 on card-based payments, requiring every credit card issuer to set a 10 percent minimum monthly repayment as part of their risk management scheme.
BI has given a one-year tolerance for card issuers to comply with the regulation, before imposing such sanctions as revoking licenses to issue credit cards.
Credit cards have lately experienced a boom, reaching some 7.5 million at present around the country, and are used for some 12 million transactions worth up to Rp 30 trillion per year, according to the Indonesian Credit Card Association (AKKI).
Apart from strong demand, the rapid growth is also due to aggressive marketing by card issuers, who offer easy application requirements, relatively low interest rates and low minimum payments, in order to net new card holders.
The downside, however, is the level of non-performing credit card loans, now standing at about 5 percent, leading to BI's regulation and an additional burden on credit card holders who have been enjoying the low minimum payments.
Not all credit card holders, however, are as worried as Cindy. Many, in fact, do not care about the rise, as they usually pay their bill in full, like Karlin, a 25-year old, who even has two credit cards.
"The total bill for both my cards is usually just Rp 500,000, so it won't matter much if the minimum payment rises," she said.
"I don't like not paying my bill in full anyway, because I know I'll then be charged interest. I also use my cards just for emergency expenses, like when I'm short of money when on a business trip abroad."