Credit card agents cry foul over service charge plan

Saturday October 31, 2009
Credit card agents cry foul over service charge plan
By JOSHUA FOONG

Government urged to withdraw service tax on credit cards

KUALA LUMPUR: Applications for new credit cards have dropped by 80% following the Government’s announcement of a RM50 service tax on each card starting next year.

The service tax, which was announced during the tabling of the Budget on Oct 23, is likely to affect more than 5,000 credit card agents and 18 credit card issuers.

With their rice bowls on the line, the agents have urge the Government to reconsider the proposal.
Card convenience: Some of the representatives from over 40 sales agencies holding up credit cards during the joint press conference in Kuala Lumpur yesterday.

Francis Teow, who runs a credit card sales agency in Penang, said banks would not be keen to maintain their large sales force if they were not confident of achieving the desired sales target when the RM50 tax was enforced.

Teow and representatives from over 40 credit card sales agencies highlighted their concerns in a joint press conference here yesterday.

As for the Government’s argument that the RM50 was seen as a way to encourage prudent use of finances, Teow said a better alternative would be to raise the interest on the minimum monthly repayment from the current 5% to 20%.

“However, the Government is well aware there are many cardholders with substantial amount of outstanding balances in their credit cards.

“And if they increase the monthly minimum payment, many will default payment and non-performing loans will increase,” added Teow.

Credit card sales agency director H.K. Tan said the service tax would not only have a negative impact on sales agents but also on card holders as well.

“The newly imposed service tax will affect low and middle-class consumers.

“Many can’t settle their outstanding bills, imagine having to fork out another RM50 for service tax,” he said.

Credit card consultant Kevin Choong said it was not viable to burden the industry that had done much for consumers with the new tax.

“Credit cards have reduced the need to borrow from loan sharks. Imagine, people who do not have credit cards to avoid paying the RM50 service tax, they may need to carry a lot of cash and they will become easy target for thieves.

“Or, if in case of an accident in the middle of the night and you need to be admitted into the hospital, the credit card provides you with financial security,” he said.

Blogger: A RM 50 service charge on each credit card definitely affected the credit card agents.

When the brokerage of the share transaction was reduced from 1% to 0.6%, it also affect the remisiers. Many remisiers actually left the industry.

I have about more than 500 clients, but many have never buy even buy one share from me. Those who used to invest in the stock market, they are still doing it. Many have never come back because they are affected by the 1997 financial crisis and they have never made a come back until today.

I have been thru many unexciting years. When the market come back in 2007, I made some money but never like pre 1997 period. 2008 is bad again. 2009 is picking.

Brokerage is not an issue. They should not reduce the brokerage for retailer players. They can give fund managers discount based on volume. But when the securities industry was liberalised, the retail players and the fund managers enjoyed the same benefits. There is no incentive for the fund managers to play the market. Therefore, the market was not active for so many years.

When retail investors have no idea about the market, when they invest in the stock market, they are charged 0.6%(many years ago was 1%), they said expensive, when they invest in unit trust, they are charged 6%, they said reasonable.

Therefore, brokerage is not an issue to the retail players. All they one is for the share to go up, for the fund managers to be able to play the market and the retailers can make some money and they are happy.

When the remisers made money, they actually pay a lot of taxes. All incomes are recorded. The government benefited in terms of taxes.

The government should be thinking of increased the brokerage for retail players from 0.6% to 1 % so that the securities industry can make more money and the government can benefit more from a active stock market.