From The Straits Times    |

May*, a human resource consultant, made $2,500 a month. And she was $100,000 in debt.

When the bachelorette, then 32, sought help from Credit Counselling Singapore (CCS) several years ago, she had splurged on overseas trips, shopping, renovation and furnishings that resulted in the six-figure sum. It took her about eight years, shelling out $1,250 a month, to finally clear her debt.

In a shopper’s paradise like Singapore where there are malls in every estate, the temptation to overspend is literally just around the corner. May is not alone. While there are many reasons why people end up in the red, half of the female clients who sought help from CCS between 2009 and 2013 cited overspending as a key cause. “People generally spend more during festive seasons and during periods of major sales,” says Tan Huey Min, general manager of CCS.

Other reasons include suffering a pay cut or job loss (one in two clients), medical reasons (one in four), extending a loan to others (one in five) or due to their business (one in five).

Insurance agent Jasmine* is among those who shouldered heavy debts due to a failed business. Then 37, the single mother with a child in primary school had invested in a pub with a few friends, pumping in money that she obtained via unsecured credit facilities (borrowing without pledging any collateral). It eventually folded. She also bought a timeshare scheme, indulged in fine dining and spent on her car’s maintenance, ending up with a debt of $110,000. Jasmine, who had a monthly income of $5,500 including the child maintenance she receives from her ex-husband, took six years to repay her debt.

May’s and Jasmine’s stories may sound like they will never happen to you – but the truth is, most of us are in some form of debt, commonly in the form of property or motor vehicle loans. According to January 2015 statistics from Credit Bureau Singapore, women between the ages of 40 and 54 have the highest outstanding credit facilities balances (which refers to mortgage loans, overdrafts, revolving credit card balances, motor vehicle loans, etc) compared with other age groups. On average, they owe between $229,907 to $238,355.

“The proportion of women in debt within the 40-49 age group is also higher compared with the other age groups, especially young adults in their 20s,” highlights Cheryl Yeo, consumer services manager at Credit Bureau Singapore.

One possible reason, she suggests, could be because women aged between 35 and 49 aremore likely to take on secured and unsecured credit facilities, while younger women in their 20s may only own unsecured facilities such as credit cards.

In severe cases, some women even end up bankrupt. The Ministry of Law’s Insolvency Office made 393 bankruptcy orders against women in 2014, though it is already an 11 per cent drop from 2013’s 442 cases. In line with CCS’ findings, the biggest proportion of bankrupt women came from the 41-50 years age group. The most commonly cited reasons? Low income or overspending.

The lure of credit cards

Women also tend to hold more credit cards, from 3.2 banks compared to men’s 3.0 banks. “Yes, I’m guilty of signing up for credit cards that I don’t use, sometimes because of the free gift they offer,” admits marketing manager Sue Lim, 38, who has seven credit cards stuffed in her wallet. She uses four of them regularly.

“My POSB Everyday Card because it offers me cash rebates for every cent I spend; my Plus! Visa credit card which also chalks up cash rebates when I do my grocery shopping at Fairprice; my HSBC card to buy movie tickets at Golden Village at a discount; and my OCBC card for its dining promotions,” says Sue.

The convenience of using credit cards with automated direct rebates has a big part to play in driving card applications. But Cheryl reminds users: “Only by paying these bills on time, will you be able to experience the full advantage of such cards.”

The problem, says Cheryl, is that many apply for credit cards without understanding the effects of overapplying for various credit facilities within a short period of time. “Credit cards that you own contribute to your available credit (limit) and affect your credit score, regardless of whether or not you are active on them. As a precautionary measure, cancel the cards that you are inactive on.”

The effects of debt

Often, we don’t realise the implications of not clearing credit card bills on time or having a bad credit score, until we try to take a loan for, say, a car or a property.

“With the information in your credit report, lenders will be able to decipher if you have made full payments on your monthly bills. They will also be aware of your total outstanding debt,” says Cheryl. If full payments are not repaid, your balance may be subject to monthly compounding interest. In fact, these days, even a simple credit card application requires lenders to pull out your credit file. “As such, it’s important to maintain a healthy score by keeping good repayment habits,” Cheryl adds.

Though Sue always clears her bill every month, she once forgot about the $180 annual fee charged on one of her inactive credit cards. Though it was eventually waived, this was not updated in time and appeared in Sue’s credit report, flagged as unpaid debt during her housing loan application. Her banker had to make several clarifications before her loan was finally approved.

The Monetary Authority of Singapore (MAS) is also imposing more stringent limits on credit card debt and other unsecured credit facilities to help individuals avoid accumulating excessive debt. Starting this month, financial institutions such as banks cannot grant further unsecured credit to anyone whose outstanding unsecured debt, across all financial institutions, is more than 24 times his monthly income for three consecutive months. This cap will slowly be reduced to 12 times by June 1, 2019.

Government policies aside, it really boils down to the individual’s discipline and determination to pay off debts. “You need to be able to delay gratification; for instance, only making a purchase once you have saved up enough for it,” says Huey Min.

Some debtors cannot get out of the cycle because they succumb to peer pressure to feel a sense of acceptance and belonging, and to maintain a certain image. “In doing so, they continuously spend, inevitably leading to chalking up more debt,” she adds.

How to pay off your debt

To avoid debt accumulation, Cheryl recommends consolidating your statements to identify recurring necessities, such as your utilities and insurance.

“Next, understand the terms of the credit facilities, such as the interest. You should always know which attracts the most interest,” she adds. This will help you avoid certain facilities or better plan which debts to pay off first.

Allocate your income into bill payments, savings and daily necessities such as food and transport. This helps ensure that you cover all your bases.

To keep track of how much you are spending on certain things, make a list of your monthly expenses. “Always remember to plan ahead before making big purchases,” says Cheryl.

Don’t forget about your credit reports. Check them at least twice a year to ensure that the information reflected is updated. This is also a good chance to get an overview of how much outstanding payment you have, such as your mortgage loans and motor vehicle loans etc. Credit reports are available at

Finally, Cheryl recommends that you reward yourself after reaching certain repayment goals, to motivate yourself. “Do not make the mistake of being too frugal,” she says.

Indeed, it is better to celebrate your small achievements with a treat you’ve budgeted for than to deprive yourself over a long period and then go mad with a shopping spree. So while bargains beckon at the Great Singapore Sale, shop cautiously and responsibly. After all, the greatest gift you can buy yourself – the peace of mind without worrying over an explosive bill at month’s end – doesn’t cost a cent.

*Not their real names

Are you spiralling into debt?

You’re not in debt – yet – but are you heading for trouble? Take note of these warning signs, says Cheryl Yeo, consumer services manager at Credit Bureau Singapore.

1 You’re only paying the minimum sum required of your monthly credit card bills. Or worse, you can’t even make the monthly minimum payments.

2 You’re struggling with payments but you’re still making purchases on your credit cards.

3 You don’t have a savings plan or budget in place.

4 You have no idea what your total debt size is.

5 You’re spending beyond your means, more than what your income allows.

This article was originally published in Simply Her June 2015.