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Cash cards offer users financial heaven and hell

Cash-advance cardholders should develop the correct attitude toward using the high-interest-rate tools and map out feasible plans to settle their debts to avoid being caught in a vicious repayment cycle.

"Cash cards, like all the other derivative financial products, cannot be categorized as a good or evil invention as they have respective specialties. It depends on how consumers use the cards," said Chen Yi-ping (陳逸平), president of the Shanghai Commercial and Savings Bank (上海商銀).

The bank, which celebrates its 90th anniversary this year, is not a cash-card issuer.

Chen made the comment yesterday at a press conference held with Taiwan Lifeline International to release the results of a survey, which shed some light on how consumers use the cards and the state of their liabilities.

Of the 405 cash cardholders interviewed between April 4 and April 8, 35.06 percent worried that they might be saddled with lifelong debts because their income cannot keep up with their cash-card spending. Another 46.17 percent of respondents said they have felt the pain of using cash cards, as the revolving interest leads to snowballing debts.

The survey found that the respondents on average have borrowed NT$111,900 (US$3,600) on their 1.76 cash cards. The debt incurred in some cases is triple their monthly income.

According to the report, one of the respondents, who earns a meager monthly salary of NT$15,000, has run up debts of NT$320,000. Excluding the cash cards' high interest rates and handling fees, this user would need to spend not a single penny for two years to pay off the debt.

"Cash cards should be used to meet an urgent need, instead of on a long-term basis, such as getting funds for studying abroad," said Teresa Chiang (江少儀), vice president at the bank's wealth management department.

The latest statistics from the Financial Supervisory Commission reveal that the nation's 33 banking institutions had issued 6.16 million cash cards as of the end of March. Outstanding loans stood at NT$270.5 billion.

Although cash cards can serve as a convenient financial management tool, many card users feel so much pain and even despair that they resort to Taiwan Lifeline International for assistance.

"We've found that over the past two years, there has been an increasing trend for financial problems to be reported as affecting relations between parents and children, and husband and wife," said Jessica Yang (楊曉青), deputy secretary-general of the non-profit organization.

She said one man called in complaining that he is jobless, cannot borrow money from banks, relatives and friends, and has no method to clear his debts.

"He lamented that he might as well finish his life," Yang said.

Taiwan Lifeline International suggests that consumers negotiate with their card issuers to pay off their debts in installments, apply for lower-interest loan programs to pay back higher-interest debts, and should not believe the pitch of commercials that cash cards could help them realize their dreams.
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