Question

Credit card is a convenient medium to conduct transactions. However, according to The Star Online (2018), 47% of Malaysian youths have high credit card debts.

Q1. What are the causes of this phenomenon? What can we do to curb this? Write an essay of about 600-800 words.

• Use 6 paragraphs for your essay.

• Your essay should have an introduction, two (2) reasons Malaysian youths have high credit card debts, two (2) solutions to curb this situation and also a conclusion.

• Give your essay an appropriate title. You do not have to attach an essay outline for this essay.

Answer 1

We will not be able to write a 600 - 800 word essay in response to this question. However, we can put together a skeleton for you. You can add your own thoughts and some meat around this and get your report of the desired length.

What are the causes of this phenomenon?

The primary causes are:

1. Easy availability of credit: Credit cards are easily accessible and available to the Malaysian youths. Banks and NBFCs have launched credit cards in a stiff competition to each other, thereby making them available to Malaysian youths. Since the purchase through credit card doesn't involve immediate outflow of money, the youths tend to spend more than required. The entire mindset around "Purchase what you need" has changed. Plastic money has led to forced and increased spending.

2. Inadequate credit assessment before issuance of credit cards: Banks and NBFCs don't undertake a detailed and thorough credit analysis of the customer before issuing the credit cards. The limits hat have been set on the credit cards are not in line with the credit ability of the customers. They had been allowed disproportionately higher credit limits on the credit cards leading to rising debt and higher defaults.

What can we do to curb this?

• System and processes for credit assessment: There has to be in place a system and process that enables a thorough and detailed assessment of the credit ability of the customers. There should be some kind of credit rating and credit score for each customer that speaks about the credibility of the customers.
• Tight credit limit on the credit cards: Each credit card should come along with a credit limit assigned on the basis of the customer's ability to repay. This will prevent the forced and unwanted purchases.