Tue, Apr 01, 2003 - Page 10 News List

Consumers build up credit-card debt

IGNORANCE Research by ACNielsen shows that a lack of knowledge about modern borrowing tools is leading the public into hock and having them pay high interest

By Annabel Lue  /  STAFF REPORTER

Earn a dollar and spend two. That appears to be the financial strategy of Taiwan's debt-carrying credit-card users, ACNielsen reported yesterday.

"About 97 percent of people carrying a credit-card debt are not familiar with financial management ... thus their personal balance sheets are always in the red" said Desmond Wang (王道平), communications manager at ACNielsen Taiwan.

And the problem gets worse: deep in debt, plastic-empowered consumers are the No.1 users of their card's cash-advance services, he said.

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

On average, banks charge 20 percent interest on all cards where only the minimum is paid each month. Taiwanese are swiping their plastic for ever larger amounts as credit-card debt grows in popularity.

According to ACNielsen's latest Life Index Report, in the second half of last year 27.7 percent of credit-card holders carried a balance, up 3 percent from the previous half.

The popularity of cash advances was also up slightly from 14.5 percent in the first half of last year to 15.2 percent in the second half.

Men between the ages of 25 and 34 are the most likely to pay the minimum on cards, with 57 percent in that category carrying a balance.

This group readily uses cash-advance services to shop for cars, consumer electronics and even swipe cash to make property downpayments, Wang said.

ACNielsen made the conclusion after conducting a survey of 7,500 Taiwanese between the ages of 20 and 60 in 2001.

Visa International reported similar results in February that showed men are more likely to quickly balance their debt than women.

Costly borrowing

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

* Last year cash advances in Taiwan incresased by 27.6 percent to NT$132.5 billion year-on-year over NT$103.8 billion in 2001.


The Visa report said 30 percent of Taiwanese card holders maintain a balance. Most of these debtors are between the ages of 20 and 35, with an annual income of between NT$300,000 and NT$1 million.

According to the Bureau of Monetary Affairs under the Ministry of Finance, last year cash advances in Taiwan incresased by 27.6 percent to NT$132.5 billion year-on-year over NT$103.8 billion in 2001.

The nation's unpaid credit-card debt last year was NT$316.3 billion, a 21.7 percent increase from previous year's NT$259.9 billion.

The popularity of plastic money is on the rise, with 39.7 percent of Taiwanese using cards. Of that group 18 .8 percent have at least four cards. In 1996, the penetration rate was 16.2 percent, the ACNielsen report said.

As of February, Taiwan issued 56.88 million credit cards.

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