Flashy lifestyles hide hints of credit card woes

Flashy lifestyles hide hints of credit card woes
By Chew Hui Yan  Posted 25 Jun 2016 15:16 Updated 26 Jun 2016 02:22

SINGAPORE: They flash their credits cards at high-end restaurants and hang out at hip nightspots. The more adventurous among them think nothing about taking yearly vacations in the most exotic, far-flung places.

But such a lifestyle has also been identified as the main reason young professionals tend to rack up unsecured debts, Credit Counselling Singapore (CCS) said.

The organisation, which helps people clear their debts, believes a lot of this is due to peer pressure.

“If you have friends who go clubbing a lot, you might feel pressured to go with them because if you don’t, you’d start to lose your friends,” CCS president Kuo How Nam said in an interview with Channel NewsAsia.

This pressure might eventually lead to an unsustainable lifestyle, which is further glamourised on social media platforms like Snapchat and Instagram.

“Don’t be fooled; people might post pictures of designer bags and nice restaurants but what you don’t see is how much they owe,” Mr Kuo said.

“Once, I picked up an issue of Tatler magazine (a luxury publication targeted at high-net-worth individuals) and recognised a client. Social status is more a function of how much you spend rather than how much you have.”

The CCS administers the Repayment Assistant Scheme, which was introduced in April last year to help those with large unsecured debts.

In 2015, it counselled 4,675 people, of which about 11 per cent were aged 30 and below. People aged 31 to 40 make up more than one third (about 1,800) of the total.

The CCS said this could be due to several reasons. For instance, people aged 31 to 40 may have young children and parents to look after; younger ones are less likely to have such responsibilities. Younger professionals thus are under less pressure financially and have greater freedom to spend on themselves.

Another contributing factor is the fact that one needs a minimum annual income of S$30,000 to be eligible to apply for a credit card. This means young adults who have just entered the workforce might not even qualify.

Mr Alfred Chia, the chief executive officer of financial planning company SingCapital, also noted that young professionals tend to have better financial literacy and responsibility compared to the older generation.

“The numbers are healthy and we’ve seen an increase in young working adults seeking financial planning,” he said. Over the last five years, SingCapital has seen an annual increase of 8 to 10 per cent in clients aged 30 and below.

Despite these encouraging statistics, Mr Kuo offered this note of caution for young professionals: “Be careful. How you spend your money is affected by who you mix with. This determines your lifestyle which decides whether or not you get into debt.”

It is also never too early for young professionals to start planning their finances, said Mr Chia. “It is normal for us to deviate from our plan but having one will remind us to come back to it,” he said.

For more on unsecured debt, catch Channel NewsAsia’s Spotlight segment on Sunday, Jun 26, at 10pm.

- CNA/av


- wong chee tat :)