Credit Cards and the Malaysian Budget 2010

With effect from January 1, 2010, principal cardholders and supplementary cardholders of credit cards and charge cards will have to pay an annual service tax of RM50/- per card and RM25/= per card respectively. More and more people are using credit cards in Malaysia. The number of credit cards in circulation has increased from two million in 1997 to eleven million in August this year. This does not include 285,000 charge cards in use. Service tax of RM50/= was previously imposed with effect from January 1, 1997, and abolished on April 1, 2001. The latest service tax is to promote careful spending among Malaysians.

Credit card transactions growth dipped to 6 percent to RM38.9 billion in the first seven months of the year, compared with an 18.2 percent increase in the same period last year,

Individuals with credit card related debts seeking the services of the central bank’s Credit Counselling and Debt Management Agency increased by 38.6 percent to 7492 from a 75.9 percent growth to 5406 in the same seven-month period last year. These accounted for 74 percent of total cases under the Debt Management Programme.

For those people who are holding 5 or 6 cards, it means an extra expense of RM250/= to RM300/=.just to keep the cards. It is time for them to reduce their cards to not more than two. Too many cards mean too much temptation to overspend and too many cheques to issue to settle debts from too many banks.