[2100] Of credit card service charge; the government should look into the mirror

I am in no position to give full opinion on the proposed 2010 federal government budget tabled earlier today. That is mostly because I need to read the whole text first. Nevertheless, I feel strongly against the idea of imposing service charge on credit card; as stated by the Finance Minister, the purpose of the charge is to curb reckless spending by individuals.

According to the budget, RM50 is to be charged on main credit card while RM25 is to be charged on each additional credit card. I would assume the fee will be charged to new users of credit cards during application period. I am unsure how preexisting users will be charged.

But no matter because as long as it is charged as fixed amount annually, here are my first thoughts that lead me to disagree with it.

Firstly, the charge is too small to be significant and on top of that, it is a yearly charge. If a person cannot afford to pay RM50, I would think that the credit card company would notice the financial status of the user and refuse the user the card. Therefore, the effectiveness of the charge deserves skepticism. If credit card companies do not filter their customers, then the companies deserve to go under.

Secondly, this is a blanket policy. Individuals with good and bad spending patterns are being punished. Of course, it is just RM50 but it is the idea of being punished for other individuals’ stupidity that makes this maddening. Recklessness should be punished while prudence should not. The free market already provides for that mechanism: bankruptcy. It works superbly. But the government has other idea it seems.

Thirdly, if RM50 is significant, which I really doubt, it mainly punishes those in the middle income bracket and more so of those in the lower income bracket who use credit cards to smoothen their consumption pattern instead of committing “reckless spending”.

Fouthly and more importantly, it suggests that the government knows better than the individual in managing their finance. Can you say, paternalism? Is the era of government knows best over? I think not.

Finally, the intention of introducing the charge, so reasoned the Finance Minister, is to curb reckless spending by individuals. To that which I will say, the government should look into the mirror.