Think again before you say 'charge it'
Think again before you say 'charge it'
By Emmy Fitri
JAKARTA (JP): As retail outlets tempt with a growing array of
charge and debit cards, the Indonesian Consumer Foundation is
warning consumers to be prudent.
Foundation vice chairman Agus Pambagio said recently that
results of an ongoing survey into credit cards would be made
public in October.
"We are also monitoring charge cards and debit cards (like
KualiVa membership cards) as they are new products," he said.
The foundation, also known as YLKI, had received no consumer
complaints about the new products, which are offered by the
retail outlets in conjunction with banks.
But he warned consumers to "be rational in your spending
needs".
The foundation has received 26 complaints this year about 10
card issuers, only half of which have been settled. Allegations
of unscrupulous practices by collection agencies -- including
people claiming to represent banks throwing stones at a debtor's
window -- are tackled by police.
Other complaints included the charging of annual membership
fees by the issuers even though a person had requested
discontinuation of card privileges; extension of credit card
membership without cardholder's approval; and debiting of a
billing fee before distribution of the card.
There had been no follow-up to an earlier attempt at involving
some banks in a working group on credit cards with YLKI, he
added.
Complaints, he said, had been "frequent" since credit cards
entered Jakarta in the 1980s. The foundation's calls for all
types of plastic money to be regulated had received an inadequate
response, he added.
Many local consumers, Agus said, lacked understanding of
credit cards, which was further complicated by the many
franchising practices and partnerships between foreign and local
banks.
While Agus agreed plastic money was aimed at making life
easier and safer, he questioned why banks seemed to have waived
many screening procedures.
"It becomes troublesome when marketing is out of control, and
it's dangerous, simply because the card issuers do not have fixed
and clear criterion for their target consumers," he said.
There were ways to subvert the basic salary requirement "as
long as we (ask for help) from the finance people in our
offices".
He said banks did not verify the data on applications by
rechecking with applicants' offices.
"These things happen as we don't have a legal institution, a
kind of 'credit watch' like in the United States and other
countries," Agus said.
Danger
The danger is that cardholders often do not possess the
fundamentals of balancing their expenses, eventually winding up
in trouble.
"They use the credit card and do not really understand how it
works, and are soon trapped in debt," he said.
Agus described marketing practices and commercials as
"dangerous" and "horrifying" in light of the lack of a regulation
or thorough screening. "Banks should not rush (their
marketing)..our consumers are not ready yet."
He said many cardholders do not understand the basic formula
for calculating their bills or interest on the cards. Studying
the fine print is important.
"Our people are vulnerable to (promises of advertisements),"
he said.
With commercials boasting new products offering complete
services and loan interest rates, people are lining up to apply.
Agus said most consumers here did not understand
there were two mechanisms used in affixing interest, which can
reach 5 percent.
"One is based on each transaction and the other is according
to the total accumulated transactions counted at the closing
date." He added most banks here use the former method.
The ideal cardholder should earn at least Rp 2 million.
Despite the attractions of debit cards, Agus reminded shoppers
that the charges that would have been made in cash were taken
immediately from the debit account.
The foundation's concern about the marketing of cards included
department stores and trading companies, which Agus said should
be under the supervision of the Ministry of Finance.
Following complaints from credit card users, the foundation
drafted guidelines on their issuance with Bank Indonesia, the
central bank, in the early 1990s.
"There was no follow up and suddenly the Banking Law was
issued in 1992," Agus said, adding there was no clause on
consumer protection in dealings with banks.
"We have always urged the government to prepare an
infrastructure for the emergence of credit cards, but so far no
action has been taken."
The foundation can only assist consumers by contacting the
card issuers.
The gains for banks are hard to detect, he said, but include
the monthly administration cost and taxes charged to consumers'
accounts.
"Consumers mostly ignore these facts," Agus said.
Before you say "charge it", consider these tips for making
prudent noncash purchases:
* Set your priority scale and buy necessities first. Needs and
wants are two entirely different things.
* Limit plastic money transactions to 30 percent of your income.
* Always take into account the interest incurred on your charges.
* Paying credit cards by account transfer is preferable up to
three to four days before the deadline. After that use cash to
avoid unnecessary charges.
* Only take cash with credit cards when really needed, to avoid
involved costs.
* Having one card is enough to make life convenient if used
properly.
* Scrutinize offers for charge cards. You don't have to go to a
supermarket just to buy a pin for the sake of collecting points.