Small credit-card loans up 35.8 percent this year

Credit card issuers should bear part of the "social responsibility" for rising consumer debt, a top official at the Consumers' Foundation (消基會) said yesterday.

"Most banks just want to profit from people who need cash and issue cards without considering users' ability to repay," said Mark Chang (張至剛), secretary general at the Foundation.

And Taiwanese are swiping their plastic for ever larger amounts as cash advances grow in popularity.

According to the Bureau of Monetary Affairs under the Ministry of Finance, credit card cash advances in Taiwan jumped 35.8 percent to NT$74.6 billion year-on-year in the period January through September over last year's NT$54.9 billion.

Cash advances allow credit-card holders to withdraw cash from ATMs for commission fees of about 3.5 percent and annual interest of 19 percent.

Growing numbers of Taiwanese have turned to cash advances as a method of braving difficult economic times.

One bank has found a new way to capitalize on that need.

"Back in 1999, we found the annual cash-advance transactions were more than NT$100 billion, thus we decided to get a piece of the pie," said Leon Li (李明峰), a deputy manager at Cosmos Bank (萬泰銀行). "Of course, with the high unemployment rate and slow economy, some people might need money for living expenses as well," Li said.

More than 550,000 customers have registered the company's small loan service, and it expects to attract another 50,000 by the end of February.

"Chinese New Year is our peak season because people need money for holiday spending like red envelopes and gifts."

Most people apply for loans to buy cars or real estate, and sometimes they might use the borrowed money to buy stocks or funds, Li said. The annual interest rate put on Cosmos Bank's small loan is 18.25 percent and the commission fee is NT$100 for every transaction.

Advertised as the fastest and simplest way to get a loan, students can get a loan in 30 minutes.

"As long as students can show their students ID and personal ID, we can allow them to withdraw up to NT$50,000," Li said.

Chang expressed concern over the ease with which young, cash-strapped individuals could secure loans via their credit cards.

"Banks should do something to protect and educate students, because most young people don't know how to manage their credit and this might lead them into bankruptcy," Chang said.

"In order to stay out of debt, I suggest that consumers do not use cash advance or loan services. If you think you really need money, you should think twice about how are you going to repay the debt," he said.