July 20, 2007
Let students have $500 credit card?
YES
'WHY not?' This was the response of eight parents out of 40 polled,
who said that in an increasingly cashless society, teenagers can be
trained to use credit responsibly, starting with a credit card with
a $500 limit.
After all, $500 is 'a small sum', said Mr Don Tan, 53, a
businessman who gives his two teenage children $700 each in pocket
money every month.
The credit card would be useful in case of an emergency or when the
children are travelling overseas, said Ms Pauline Goh, a secretary
in her 50s.
The new card appealed to 10 students who liked the convenience of
being able to buy bigger-ticket items without having to lug wads of
cash or waiting for their next allowance. They also expected the
card to offer privileges or discounts at restaurants or shopping
malls, which debit cards lack.
'If there were discounts at, say, HMV or McDonald's for the $500
credit card, that could be an incentive for me to apply for one,'
said Ms Cherry Tan, 19.
'For every student there who defaults on a credit card payment,
there are many more who are responsible borrowers.'
UNDERGRAD EDWIN LEE, on the no-minimum-income card situation in the
US
'These kids would have a higher risk of default since they are
clearly borrowing beyond their means.'
ENGINEER RICHARD TEO, who felt the $500 card could attract those
who may not have enough in their savings accounts
RELATED LINKS
Two sides of the issue
The practice of offering credit cards with no minimum income
requirement is already prevalent in the United States, said Mr
Edwin Lee, 24, who is studying there. 'For every student there who
defaults on a credit card payment, there are many more who are
responsible borrowers,' he said.
Indeed, a Credit Bureau of Singapore study showed that the
proportion of credit card holders here aged between 21 and 29 who
missed at least one payment last year was 6.6 per cent, lower than
the overall national average of 8.14 per cent.
Bankers also said that holders of the $500 card would have their
spending monitored closely, and their cards would be blocked
instantly if they did not pay up the minimum balance on time.
NO
GETTING a credit card with a $500 limit was a definite 'no go' for
Glen Chew, 24, a student at the Singapore Management University
(SMU).
'I prefer to spend within my means, especially since my parents are
not well off,' he said. 'But I may be one of the minority among
youths who think credit cards - even if they are capped with a $500
limit - encourage overspending habits.'
Mr Chew would have been surprised to find that he was one of 25
young people who said they were not keen on plastic. Many felt
their needs were being met by debit or supplementary cards.
Parents also preferred their kids to use such cards as their
spending could be tracked easily.
The $500 credit card, by contrast, may encourage 'irresponsible
spending', said accountant Tan Lee Wen, 46.
Another parent, engineer Richard Teo, 48, felt the $500 card could
attract mainly those who do not have a supplementary card and also
may not have enough in their savings accounts.
'These kids would have a higher risk of default since they are
clearly borrowing beyond their means,' he said.
Parents also voiced concerns that their children may get a black
mark on their credit history if they were careless. IT executive
Angie Fang, 51, said: 'My son can be quite a scatterbrain. What if
he loses the card and forgets to cancel it for months, only to find
a big bill?'
Mr Mohamed Salim, a financial adviser at First Principle Advisory
and a father of three children, said young people need to be
trained to spend within limits and 'to earn the money they
spend'.
I am totally against this when finally the benificaries are the
banks with their interest collections and fees collections from
both the users and retailers. I prefer that my children learn to
spend what they "have" and not what they "will have".
