Poll reveals a city sinking in debt

Poll reveals a city sinking in debt -

Crippling credit card interest rates of up to 40 percent are pushing Hong Kong people into a spiraling cycle of debt and forcing them to borrow even more, according to a survey released yesterday.

Nishika Patel

Tuesday, June 17, 2008

Crippling credit card interest rates of up to 40 percent are pushing Hong Kong people into a spiraling cycle of debt and forcing them to borrow even more, according to a survey released yesterday.

About 37 percent of the respondents found it too difficult to fully repay their credit card bills with 63 percent blaming high interest rates.

About 60 percent said they had overspent without noticing, according to a Hong Kong University public opinion poll of 501 people.

"High interest rates push people more heavily into debt. If they do not settle their debt in full, every new purchase will start being calculated with interest. In Hong Kong almost all banks charge high interest rates compared with other countries," according to Joyce Mok Yuen-yu of PrimeCredit which commissioned the poll from May 26 to June 2.

According to the Hong Kong Monetary Authority, there were 11.5 million credit card accounts with HK$74.5 billion in unsettled debts in the first quarter of 2008. Of these, 34 percent or HK$24.4 billion were rollover balances.

The average interest rate on credit cards is 36 percent a year, which means the interest for the rollover balance in the next year is expected to fetch HK$7 billion.

Half of the respondents who were unable to pay fully would borrow from banks or financial institutions.

On average, people had 3.5 cards, while 2 percent owned at least 10 cards. On average, respondents spent HK$7,164 per month and 10 percent spent more than HK$20,000 per month.

About half the respondents opted for partial repayments and 30 percent only settled the minimum payment - saying they wanted to keep more cash in hand or because of cash-flow problems. About half said they felt controlled by card debts while 20 percent were anxious about payment reminder calls and had problems concentrating on work.

"Credit card debt puts a lot of pressure on people and the way to manage this is to make balance transfers which lowers the interest, shortens repayment time and helps to consolidate debt," Mok said.