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An executive summary for managers and executive readers can be found at the end of this article.
Introduction
The liberalization of the financial sectors in Asia has resulted in the rapid proliferation of credit card companies and financial companies providing other types of consumer credit. This, coupled with the entry of foreign banks, has greatly increased the number of credit cards available, and hence such spending in Singapore. Approximately 4.5 million main and supplementary cards were in use as of December of 2005 ([33] Monetary Authority of Singapore, 2006), an increase of 102 percent from the same period in year 2000. The primary credit cardholder in Singapore on average holds three credit cards and 60 percent of them own cards issued by more than one bank ([43] Tan, 2004). Another set of statistics showed that the average household in Singapore owned 3.4 credit cards, compared to four per household in Hong Kong and at least five credit cards per household in Taiwan ([48], [49], [50] Visa International, 2004a, b, c).
The annual total credit card billings in Singapore grew to S$16 billion in 2005, a rise of 14 percent from 2004, and the rollover balance for credit and charge cards in Singapore stood at S$2.8 billion in December of 2005, with approximately 40 percent of cardholders rolled over their credit card balances ([54] Wong, 2005a) - hence creating a healthy source of profits for credit card issuing companies and banks.
Credit spending and credit cards in particular, have been singled out as the tool that fueled indiscriminate spending. In 2005, banks in Singapore wrote off as much as S$137 million in credit card debt, and Singaporeans ran up a median debt of S$1,022 on their credit card accounts while their average monthly balance stood at S$3,800 ([43] Tan, 2004). This may not seem significant, but recent data revealed the presence of big spenders - in one month alone, 25,000 cardholders charged at least S$10,000 on their cards, and among them 4,000 charged at least S$20,000 ([54] Wong, 2005a).
Overspending on credit, which attracts as high as 24 percent of the annual interest rate, is the primary cause of bankruptcies in Singapore. Between 2001 and February 2006, Singapore had more than 23,631 un-discharged bankruptcy cases, with...