Bad credit card debt that was "written-off" jumped 16% to $20.74m in March.
Singapore bad credit card debt that has been written off by banks rose 16% MoM to $20.74m (SG$27.9m) in March from $17.92m (SG$24.1m) the month before as a growing number of residents turn to debt to finance their various consumption needs, according to a study by ValuePenguin.
The study adds that the current level of written off card debt on a per card basis was only 4% lower than its peak level in the last decade.
Lenders typically take a loss and "write-off" delinquent loans that are more than 30 days overdue and cannot be recovered. Despite mechanisms installed by the government like debt consolidation plans, the sharp growth in bad credit card debt may have negative spill over effects to the economy, the report cautioned.
Here's more from ValuePenguin:
Whilst it's still too early to tell if credit card debt and consumer balance sheet will continue to deteriorate, this initial jump in 2018 is a good reminder that consumers should be careful about borrowing to make purchases. In reality, credit card debt and its deterioration alone is not an immense problem for the economy because it makes up only 2-3% of total household debt in Singapore.
However, the rise in credit-card delinquencies could be a harbinger of more potential problems. If credit card delinquencies continue to rise, then consumers may start to feel bigger impacts on their finances and begin defaulting on their loans when the effect of higher rates begins to permeate through other products and markets. When the cost of their debt rises, consumers find themselves with less money to spend on their daily needs, which drives down general consumption and demand in the economy. Whilst debt driven consumption growth may seem good to both to economy and for people who get to enjoy things that they can't readily afford, it can result in a massive hangover especially when rates are rising.
Do you know more about this story? Contact us anonymously through this link.