24-07-2011, 08:23 AM
Jul 24, 2011
Too young for credit?
Some parents think their kids are not ready for credit cards, be it supplementary ones or those with a $500 spending limit
By Jane Ng
When undergraduate Darius Ang's younger brother chalked up a bill of $6,000 on his supplementary credit card, their mother was so shocked that she cried.
The bill, which Darius eventually paid with his savings, was for motorcycle accessories.
'My mother didn't know about it, so when she got the bill, it came as a shock to her,' said Mr Ang, 25, who comes from a single-parent family and whose mother works as a retail assistant.
There is another case related to LifeStyle by Mr Sam Goh, founder of Wisdom Capital, whose firm conducts training on cash and debt management: A business undergraduate was given two supplementary cards with no spending limit. He chalked up bills in the high range of five-digit amounts buying branded goods.
His mother decided to terminate the cards, so he borrowed money from his close friends to finance his habit. Eventually, his debts got out of control and his parents had to settle them for him.
It is not always a good idea to mix credit cards and young adults who have not begun earning their own keep.
Naturally, alarm bells go off in some parents' heads when they find out that there have been credit cards introduced in recent years which do not require cardholders to have an income statement.
They are called micro credit cards. These cards, including the eVibes by Maybank and Citi Clear card by Citibank, are targeted at tertiary students who have to be above 18 to apply for one. They come with a monthly spending limit of $500 and do not require applicants to produce a payslip.
Some parents are concerned that such cards may tempt their children to spend on credit.
Sales executive Irene Tan, 45, has a daughter studying at a polytechnic who is keen on getting such a card. But she disapproves of it, saying: 'It gives them a temptation to spend what they don't have. And they are not even earning money yet.'
Another parent of a 20-year-old son, who wants to be known only as Madam A. Lim, says giving a young person a credit card is tantamount to 'going down a slippery slope'.
'There's a never-ending list of things that kids want nowadays. Knowing they can sign for it first and pay later, they may end up wanting more material goods,' adds the housewife.
But young people who have such cards say they are attracted to the convenience as well as the good deals the cards offer, rather than the lifestyle of living on credit.
Mr Ang, a second-year student at Nanyang Technological University, for instance, uses the eVibes card to make payment online for the printing of original examination transcripts.
Mr Lee Wei Leong, 22, who recently graduated from Temasek Polytechnic, has three such micro cards and he uses them when there are dining deals tied to the cards.
'I pay the bills myself and so I'm careful not to overspend,' he said.
The banks which offer these cards add that they offer financial advice to students along with these cards, for instance in the welcome pack for approved credit card applicants.
Ms Helen Neo, head of consumer banking at Maybank Singapore, says the bank gives tips to its customers such as how to avoid falling behind on payments and to pay off as much as they can every month.
Citibank Singapore conducts credit-education programmes, some of which are targeted at youth.
Other financial experts advise that young people should limit the number of credit cards they carry based on their payment capability and pay bills in full. They should also avoid using credit cards to get cash advances from ATMs.
Abuse of credit card horror stories aside, there may be an upside for children to hold supplementary or micro credit cards.
Dr Koh Noi Keng, a lecturer at the National Institute of Education who is also chairing the Citi-NIE Financial Literacy Hub for Teachers, says parents who give their children a supplementary credit card are taking a step towards inculcating financial responsibility in them.
'It is a good tool to teach youths on managing their money and to impress upon them that a credit card should never be used as a borrowing tool,' he explains.
And that is a lesson Mrs Magdalene Chan, 47, an administrative assistant, has managed to impress upon her son Russell, 21, who has just graduated from Nanyang Polytechnic.
Mrs Chan gave him a weekly allowance in primary school and a monthly allowance in secondary school, as she wanted him to learn to manage his own budget.
'When he was young, I gave him $10 and he would spend $12 by borrowing from his friends,' she says.
'He learnt the hard way. If he finished most of his allowance in two weeks, he just had to make do the rest of the month with less money.'
Today, Russell has three supplementary cards from his parents with a spending limit of up to $21,000 but his credit card bills are usually just over $100 a month - and he pays the amount back to his parents.
'I'm not a person who spends on credit. I spend what I have. If I have $1, I'll just spend 80 cents. That's what my mum taught me and it has become a habit,' he says.
Too young for credit?
Some parents think their kids are not ready for credit cards, be it supplementary ones or those with a $500 spending limit
By Jane Ng
When undergraduate Darius Ang's younger brother chalked up a bill of $6,000 on his supplementary credit card, their mother was so shocked that she cried.
The bill, which Darius eventually paid with his savings, was for motorcycle accessories.
'My mother didn't know about it, so when she got the bill, it came as a shock to her,' said Mr Ang, 25, who comes from a single-parent family and whose mother works as a retail assistant.
There is another case related to LifeStyle by Mr Sam Goh, founder of Wisdom Capital, whose firm conducts training on cash and debt management: A business undergraduate was given two supplementary cards with no spending limit. He chalked up bills in the high range of five-digit amounts buying branded goods.
His mother decided to terminate the cards, so he borrowed money from his close friends to finance his habit. Eventually, his debts got out of control and his parents had to settle them for him.
It is not always a good idea to mix credit cards and young adults who have not begun earning their own keep.
Naturally, alarm bells go off in some parents' heads when they find out that there have been credit cards introduced in recent years which do not require cardholders to have an income statement.
They are called micro credit cards. These cards, including the eVibes by Maybank and Citi Clear card by Citibank, are targeted at tertiary students who have to be above 18 to apply for one. They come with a monthly spending limit of $500 and do not require applicants to produce a payslip.
Some parents are concerned that such cards may tempt their children to spend on credit.
Sales executive Irene Tan, 45, has a daughter studying at a polytechnic who is keen on getting such a card. But she disapproves of it, saying: 'It gives them a temptation to spend what they don't have. And they are not even earning money yet.'
Another parent of a 20-year-old son, who wants to be known only as Madam A. Lim, says giving a young person a credit card is tantamount to 'going down a slippery slope'.
'There's a never-ending list of things that kids want nowadays. Knowing they can sign for it first and pay later, they may end up wanting more material goods,' adds the housewife.
But young people who have such cards say they are attracted to the convenience as well as the good deals the cards offer, rather than the lifestyle of living on credit.
Mr Ang, a second-year student at Nanyang Technological University, for instance, uses the eVibes card to make payment online for the printing of original examination transcripts.
Mr Lee Wei Leong, 22, who recently graduated from Temasek Polytechnic, has three such micro cards and he uses them when there are dining deals tied to the cards.
'I pay the bills myself and so I'm careful not to overspend,' he said.
The banks which offer these cards add that they offer financial advice to students along with these cards, for instance in the welcome pack for approved credit card applicants.
Ms Helen Neo, head of consumer banking at Maybank Singapore, says the bank gives tips to its customers such as how to avoid falling behind on payments and to pay off as much as they can every month.
Citibank Singapore conducts credit-education programmes, some of which are targeted at youth.
Other financial experts advise that young people should limit the number of credit cards they carry based on their payment capability and pay bills in full. They should also avoid using credit cards to get cash advances from ATMs.
Abuse of credit card horror stories aside, there may be an upside for children to hold supplementary or micro credit cards.
Dr Koh Noi Keng, a lecturer at the National Institute of Education who is also chairing the Citi-NIE Financial Literacy Hub for Teachers, says parents who give their children a supplementary credit card are taking a step towards inculcating financial responsibility in them.
'It is a good tool to teach youths on managing their money and to impress upon them that a credit card should never be used as a borrowing tool,' he explains.
And that is a lesson Mrs Magdalene Chan, 47, an administrative assistant, has managed to impress upon her son Russell, 21, who has just graduated from Nanyang Polytechnic.
Mrs Chan gave him a weekly allowance in primary school and a monthly allowance in secondary school, as she wanted him to learn to manage his own budget.
'When he was young, I gave him $10 and he would spend $12 by borrowing from his friends,' she says.
'He learnt the hard way. If he finished most of his allowance in two weeks, he just had to make do the rest of the month with less money.'
Today, Russell has three supplementary cards from his parents with a spending limit of up to $21,000 but his credit card bills are usually just over $100 a month - and he pays the amount back to his parents.
'I'm not a person who spends on credit. I spend what I have. If I have $1, I'll just spend 80 cents. That's what my mum taught me and it has become a habit,' he says.