Wednesday, April 7, 2010

Sometimes Government Policy Does Work: Credit Card Edition

Back during the tabling of the 2010 budget, the Government proposed a RM50 levy on each principal credit card and RM25 on supplementary cards. I thought at the time and from the anecdotal evidence that the levy might have some effect on people “collecting” credit cards.

Boy, was I wrong (log annual and monthly changes):



The effect has instead been pretty dramatic – from an October 2009 peak of over 11.23 million cards (principal and supplementary), Malaysians have returned or cut up 1.15 million cards or just over 10% of the total. The sudden drop in card circulation has also skewed metrics based on card numbers – a definite structural break for those interested in statistically analysing the local credit card market. That’s probably cold comfort to the hoards of credit card sales agents across the country, but the impact must be pretty gratifying to policymakers at BNM and the Treasury.

On a side note, it also appears from the data that consumers are spending again:



The first chart above shows the percentage of current balances outstanding as a percentage of the credit line extended – card users are rolling over approximately 22% of their credit limits, which isn’t bad compared with many other countries, though it makes the whole business much less profitable for banks. The second chart shows that people are also swiping their cards more often, which bodes well for GDP growth in 1Q2010 – I think the economy will likely surprise quite a few people this year.

Technical Notes:

Data from Bank Negara Malaysia’s Feb 2010 Monthly Statistical Bulletin


  1. pipe smokin buddy....

    just it possible that total number of unique card holders is the same and their "main" CC gave them a higher limit to compensate of the potential surrender risk of the cards?

    if so net effect macam kosong jugak?

  2. and how bout the effect of balance transfer with 0 interest? could that b the source of increase in chart 1 given the fact the number of cards are now lower....

    just tembak2 only

  3. tembak all u want bro satD

    Limits have come down as well, though slower and not as much as the number of cards. So there may be some element of compensation involved, but not enough to cover the drop in no of cards.

    For the second Q, rollover balances are calculated independently of the number of cards (current outstanding balances/total line of credit granted) so balance transfers shouldn't be a factor.

  4. tks for d clarification...bro

    not bad for a 75 ringgit policy action.....

    cheopo jugak we malaysians....