Worries hold down credit card spending

Average credit-card spending has grown this year by only 5.2 per cent as consumers are greatly concerned about the state of the economy, according to the University of the Thai Chamber of Commerce.

“Normally spending on credit cards should increase about 10 per cent each year. However, with this year’s slowdown in economic growth and delay in spending by the government, as well as the drop in prices of farm crops, mainly rubber and rice, and concern over flood problems in the North, credit-card spending will be low,” said Thanavath Phonvichai, director of the university’s Economic and Business Forecasting Centre.

Credit-card spending is forecast to increase by 5.2 per cent to Bt1.53 trillion this year, compared with 10.6 per cent growth to Bt1.45 trillion last year, while spending per capita will drop to Bt75,384 from Bt78,408. 

According to the Bank of Thailand, credit-card spending during the first seven months of 2014 rose by 5.7 per cent year on year to Bt865.22 billion, compared with rises of 11.7 per cent in 2011 and 12 per cent in 2012.

The number of credit cards issued by both banks and non-banks increased by 9.4 per cent during the period to 19.52 million cards, compared with 10 per cent to 18.54 million cards in 2012.

Consumers have little confidence to spend their money, while some low-income people have maxed out their credit cards. 

Thanavath pointed out that although consumer confidence has been on the rise after the political conflict subsided in Thailand, consumers are still worried about their future incomes because of the falling prices of farm crops and less-than-expected expansion of the economy.

Gross domestic product is projected to pick up by about 2 per cent this year, but if the government is slow in stimulating the economy in the fourth quarter, it could advance by only 1.5 per cent this whole year.

To promote consumer spending, the new government should accelerate budget disbursement and solve the problem of declining prices of farm crops, he said. 

Respondents to the university’s poll also want the government to solve household debt problems by helping to ease the cost of living, lower interest rates and create more jobs and equality to solve the poverty problem.

The debt problem for credit-card holders could also become worrisome in the near future. The poll showed that up to 11 per cent of the 1,198 respondents admitted that they planned not to pay their credit-card balances in the next three to six months, rising from the current rate of 6.5 per cent.

Consumers with incomes below Bt20,000 a month have tended to face difficulties in making credit-card payments. Most people in the low-income group are day workers and undergraduate students.

The survey also showed that most consumers use their plastic for essential items as top priority, mainly consumer goods at supermarkets, followed by fuel, clothes, restaurants and utilities. The cards are not being used much this year for electricity, ornaments, or automotive and home items.

However, most people – up to almost 70 per cent – admit that credit cards cause them to forget financial discipline and overspend.