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More people tapping plastic for cash

THE increase in credit-card cash withdrawals and decrease in retail sales are signs of a liquidity crunch among consumers, according to TMB Analytics.

"Given the 20-per-cent interest rate for withdrawing cash [from a credit-card account], nobody would want to do it unless they are really short of funds," it said.

In a research note, TMB Bank's analysis department showed that credit-card-based cash withdrawals in the first nine months rose by 13 per cent year on year, up sharply from only a 5-per-cent jump in the same period last year.

However, cash withdrawals normally climb when the economy faces a crisis.

Most people making these withdrawals are customers of non-banks, as they generally earn less income than customers of commercial banks. Cash withdrawals have risen even though the economic outlook has softened. In the third quarter, gross domestic product expanded only 2.7 per cent year on year.

In the same quarter, retail sales, which have never shown a quarterly contraction in the past 10 years, except for the last quarter of 2011 because of the massive flooding, fell 0.9 per cent.

The sales decline was led by household appliances and furniture, which sank by 5 per cent, compared with just a 1-per-cent drop in the first two quarters.

The data confirmed that consumers have tightened their belts and as expenses mounted, they coped by using credit cards to borrow cash, says TMB Analytics.


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