To Cut or Not To Cut?

For many Malaysians, the first thing that probably comes into mind is the on-going P1 WiMax advertisement that has caused some gender controversies but essentially tried to convince consumers to switch their internet broadband services to the wireless WiMax technology. The latest P1 WiMax technology is supposed to make the experience of broadband internet surfing better and faster, "plug-and-play" with no physical phone line required.



Now that's not what I am referring to. I am referring to the more pressing issue of Malaysia's Government's recent plan to introduce service tax for credit cards from 2010 onwards. To recap, each card holder will be charged RM50 and RM25 for each principal card and supplementary card respectively, starting January 2010. If a person holds 5 credit cards with two supplementary, the total amount could add up to RM300 each year, and that's a big amount to pay for!


Personally, I hold something like 10 credit cards! Well, it's not that I'd like to have so many of them but merely because of the different kind of benefits that each of these cards could offer. For example, some credit card offer 2% rebate on petrol usage, while some others offer better discounts or rebates for supermarket spending, etc. Essentially, the banks have been very creative in rolling out different kinds of benefits to entice consumers to sign up for different credit cards. Since we can't have all-in-one facility, we have no choice but to sign up for these different cards. After all, there is no harm done provided the use of credit cards are not abused.

With the introduction of service tax, the benefits now seem to be muted. Besides the consumers, the biggest losers will be the banks and the sales agents whose livelihood depends on promoting the credit cards to earn a commission!

While the objective of prudent spending appears sound and should be supported, I believe it should not be done at the expense of genuine credit card spenders. The Government should instead impose targeted measures on credit card holders who defaults on payment on a regular basis. For instance, a mechanism to suspend all the credit cards of a particular credit card holder who defaults more than x number of times should be considered. Else, create more incentives for the use of debit cards instead of credit cards instead.

Nevertheless, if you are holding on to many credit cards right now, do not simply cut them apart. Wait for further advice from banks pertaining to this matter. I believe banks are actively pursuing the matter with the Government in order to come up with better measures. With the Government's constant flip-flopping policies, it will not be a surprise if they decide to change it again!

After all, it's also still not too late to make a final decision to cut your credit cards in December, if the situation renders so.