Rise in credit card debt rollovers and charge-off rates worrying

Year: 2020

This post is written as a brief comment to the Monetary Authority of Singapore’s data on Credit and Charge Statistics. 

“FMG notes the MAS data on credit cards and balances. We make several observations. First, the total number of primary and secondary cards issued is greater than the total population of Singapore.

Once we exclude those below the age of eligibility and income level, it shows that the ratio of credit to an individual is almost 3 to 1.

Secondly, the growth in card issuances is secular.

Third, the amount of total credit has also grown.

Most worrisome is the sustained increase in debt rollover and the rising percentage in charge off rates which is at an all-time high. This shows that Singaporeans and eligible foreigners are either depending on more on credit or have not curbed consumption.

Billings may also be attributable to online purchases during the circuit breaker.

However, the data indicate the rising number of cardholders who are paying high-interest rates, thus digging themselves into financial holes and rising NPLs for personal credit for banks to absorb.

The MAS should curb credit expansion, raise the income eligibility for cards and require banks to intervene with customers who roll over debt to help with debt management.

We anticipate that charge off rates will reach 10% and bad debts will rise to over SGD100 million per quarter by 1H2021.”

– Devadas Krishnadas
CEO, FMG