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Do credit cards make payment too easy?

Update: March, 23/2014 - 20:34

by Thu Huong Le

Every month, I get perhaps the most unwanted message of the month, reminding me about my credit card debt and the payment deadline. Every month, I look at that message with utter disbelief, pondering where I lost track of my spending (or really, where did I shop or eat?) to deserve this.

The feeling of being debt-ridden is always awful. The feeling of being in a credit debt is even worse, as unlike situations when you're in debt (to friends or relatives) due to compelling scenarios, such as sickness or in emergency situations, credit card debts tend to accumulate due to spending on unnecessary items.

I felt as though I was the central character of the movie Confessions of a Shopaholic, the perfect exemple of how credit card is the cornerstone of America's consumerism.

But how did this happen in a country that prefers cash, detests coins, stacks gold bars as savings? This kind of "virtual spending" will perhaps never appeal to those of the earlier generations, but for the youngsters and emerging middle class, apparently I'm not the sole victim.

If earlier generations were adept at saving, this generation has a knack for spending.

According to a report released by the Research and Markets Company based in Ireland, titled "Emerging Opportunities in Viet Nam's Cards and Payments in 2013", the country has been experiencing "changing spending patterns, advancements in e-banking services, and the emerging trend of online shopping".

The report indicated that the credit card category recorded the highest growth rate of all the card categories with a compound annual growth rate of 56.29 per cent for the 2008-12 period, increasing from 228,700 cards in 2008 to 1.4 million cards in 2012.

At the annual conference of the Viet Nam Bank Card Association held in May 2013, it was revealed that the total number of cards (credit and debit cards) in the market were about 57.1 million.

More banks are now marketing credit cards to not just high-income earners, but even people in the middle income range of VND5-7 million (US$250-300) a month. Banks employ fast and easy paperwork procedures, tempting discounts at hotels, resorts, bars, restaurants, and prize-drawing competitions as baits to lure more customers.

Surely, it can be useful if you travel abroad and can't have access to cash or during emergency situations. It is also extremely convenient for online payments.

My friend, Nguyeân Ha Phuong, a former accountant, said that she received almost five to six calls a week from the bank's marketing staff urging her to take credit card from their bank. After a while, she gave in to the temptation and took credit cards at the two banks.

"It was tempting. I received a cash return as reward for being the first-time card holder of about VND1 million and was entitled to various discounts at stores. I felt like I was a VIP. However, I did not realize that without carrying credit cards or not being entitled to these discounts at stores, I probably would not spend at all," she said.

Nguyen Lan Anh admitted that she was tempted to upgrade to a newer version of smartphone and book flight tickets to Bangkok using her credit card.

"Maybe I would not do it if I have to pay everything in cash," Anh acknowledged.

I too felt as though my social status was upgraded when I flashed my credit card for making payments, only to realize later that I had to pay for them.

Experts call this the pain of paying. That means when you pay for something in cash, you tend to feel the pinch more. Paying by credit card does not make you feel guilty at all, at least while you are buying something.

A year ago, Phuong was laid off from work and was stuck with credit card debts that had piled up due to earlier transactions. After finally getting re-employed, Phuong vowed to end using credit cards.

A bank staff informed me that she was required to rope in at least five new credit card customers per month. So, she kept making calls on a daily basis and sought leads from friends and relatives for reaching out to potential customers.

Other senior staffers had to generate up to 20 new customers per month.

The banks constantly push people to opt for cards because it can stimulate consumer spending even during times when consumers have to curtail their expenses on many necessities.

The Government hopes that by the end of 2015, cash payments will make up for nearly 11 per cent of all transactions.

Thus, increased consumer spending might be good for the economy, but credit card debts are bad for us (and even the economy, if we can't repay them back) and our self-esteem takes a beating as well.

In the US, experts estimate that Americans' credit card debt has topped $960 billion and are mulling over ways on how that amount will be paid? Consumer bad debts can cause trouble for the nation's economy in the long run.

The situation in Viet Nam, evidently, is not that bad or not as yet. It cannot impact the country's banks, but it can impinge upon our self-esteem and make us more susceptible to indulgence. Our country is still poor and if youngsters get into the habit of spending before earning, then it can have long-term repercussions.

Phuong confiled that with her new job, she now earns VND5 million a month and vows to spend her money wisely.

"I can't fall into this trap again. I can't afford buying things that I can't afford," she asserted. — VNS

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