Credit card issuers warned that bad credit card debts are expected to increase, as consumers pinched by the economic slowdown and the rising cost of living will find it increasingly difficult to service their debts.

On the face of it, credit card companies seem to be acting out of concern for the financial wellbeing of their customers, but on closer inspection they are actually protecting their own interests when they ask regulatory authorities to postpone the deadline.

Under the April 1, 2004 revision of the Regulations on Conducting Credit Card Business, the BOT requires credit card companies to cancel the credit cards of holders who have been delinquent in their payments for more than three months. It is obvious that when the 10-per-cent repayment requirement comes into force, the number of cardholders defaulting on their credit-card debts will rise.

However, only undisciplined cardholders who have been living beyond their means will be affected, which is not in itself a bad thing. Credit card issuers should take responsibility for the risk of their customers defaulting, which is part of the risks and rewards of the credit card industry.

Meanwhile, those who have acquired credit cards since April 1, 2004 are already required to meet the minimum payment requirement of 10 per cent.

The increase in the minimum monthly payment to 10 per cent of a holder's balance is aimed at preventing them from spending more than they are able to repay as well as to help them pace their purchasing decisions in order to prevent excessive debt repayment in the future.

The BOT should be commended for its proactive role in ensuring the healthy expansion of the credit card industry, while at the same time protecting consumers. A minimum monthly income requirement for cardholders has been set at Bt15,000, and a cap on the maximum interest rate that can be charged has been put at 18 per cent per annum.

As regulations governing the credit card industry have been tightened, undisciplined consumers turn to personal loan providers, who charge exorbitant interest rates of up to 58 per cent per annum. In July last year, the BOT also reined in the personal loan business by setting the ceiling on interest rates at 28 per cent per annum.

The credit card industry and personal loan businesses have both positive and negative effects on Thai society. On the one hand, they are a convenient option for consumers and have enabled them to be able to spend more on necessary items before they begin to save. To derive full benefits and minimise risks, consumers must exercise self-control in their spending habits to make sure they are capable of meeting the repayment schedules when they become due.

The problem is that too many people in this country go through their lives without the slightest idea about financial discipline, or the necessity of saving for rainy days, or even of having a nest egg for retirement. In the traditional extended family environment, many do not think it is necessary to save or achieve financial independence partly because they know that they can always borrow from family members, not only to help make ends meet but also to indulge in overspending and conspicuous consumption.

There is no reason why the central bank should relax the minimum repayment requirement particularly at a time when all signs point to an economic slowdown. Now more than ever, credit card users must tighten their belts and maintain a strict financial discipline. Credit card issuers should likewise conduct their business in strict compliance with regulations.