PRs, new citizens chalking up huge card debts

Many face the burden of supporting large families in their original homeland

NEW citizens and permanent residents (PRs) are an emerging group struggling with credit card debt, forming at least 10 per cent of the 1,285 clients handled by Credit Counselling Singapore (CCS).

CCS, an organisation which provides counselling and helps debtors work out repayment plans, said these debtors - many of whom have racked up large credit card debts - come from various countries, including Malaysia, the Philippines and India.

Their numbers have been growing over the last two to three years, said CCS assistant director Tan Huey Min. Of these, individuals from the Philippines form one of the largest groups.

Last year, 62 PRs and new citizens from the Philippines received counselling, up from just one three years ago.

Typically, the PRs and new citizens who approach CCS for help are professionals who earn about $4,000 to $5,000 a month.

And one of the key reasons many of them get into debt: they have to support large families back where they came from while having to pay rent and other expenses in Singapore.

IT professional Robert (not his real name) is an example. Each time the PR returned to the Philippines, he would go bearing gifts for all his family members.

It may have brought a smile to the faces of his loved ones - but the kind gesture cost him a lot.

'Every month we would pay one bank and not the others, but after some time, some banks said we had to pay in full, and we couldn't do that,' he said.

Robert said he and his wife, who is also working in the IT industry, owed banks about $112,000 when he sought help from CCS last August.

The debt was due to his in-laws' medical bills, unsound investments in the Philippines and having to pay for the education and living expenses of some family members who were not working.

Said Ms Tan: 'One has to do one's sums first before deciding how much one can really send home or make commitments like buying land and property back home.'

But this is difficult as expectations about those living and working abroad are high, said Robert. 'Once you have gone abroad, people expect you to give the most financially because they think you are earning more. But they don't know about the cost of living here.'

Things got worse for Robert and his wife when their company cut their salaries last year.

The amount owed by each individual who seeks help at CCS is on average $70,000, owed to about seven creditors.

But PRs are not the only ones in need of help. On the whole, CCS counselled 1,285 individuals last year, up from 714 in 2008 and 685 in 2007.

Ms Tan said the increase in numbers was partly due to the financial crisis, more awareness of the assistance provided by CCS and an increase in the number of staff, which allowed them to handle more cases.

Figures from the Monetary Authority of Singapore also show the same trend of increasing debt.

As of November last year, credit card debt was an estimated $3.7 billion - a 9.8 per cent increase from a year before. The number of cards, however, increased by only about 6.7 per cent over that time.

CCS said job-related problems such as pay cut and retrenchment, together with overspending, were the top reasons given for indebtedness, followed by gambling, medical bills and renovations.

It advised those in debt to cut down on discretionary spending, such as eating out or clubbing, and to take public transport more often.

'People don't realise, but just $20 here and $30 there, three or four times a week can add up to about $500 a month, and if you don't have the budget for that, you'll have to rely on credit facilities. It all boils down to mismanagement,' said Ms Tan.

Source: Straits Times, 28 Jan 2010.