No Cheer on Credit Card Service Tax

The imminent imposition of credit card service tax is going to affect the number of such cards held by an individual.

The Star report today on how the issuers are going to settle the service tax for their cardholders.

Star, Dec 29, 2009

The conclusion is banks are not going to pay for the cardholders as otherwise rumoured. It would be interesting what those banks who are asking customers to pay will handle it tax. Maybank for one has already said that the rewards points can be used to offset the charges and the Star report confuses customers if they have changed it to disallow customers to use their rewards point to offset the tax! Their website at Maybank2u said that rewards points can be used. Why the difference in the Star report and their website?

A check with RHB also said they allow for rewards points to offset the service charge. Wonder why the Star report is giving conflicting reports and confusing the public? Someone must not be telling the truth!

So how many reward points to use to offset the service tax? Seems an average of RM500 spent monthly will be enough or a total of 10,000 points to get a RM50 rebate. And if the cardholder has to pay for the annual fee for those kiasu bank who still charges such fees, it will mean spending about RM2000 a month or so to use your points to pay for say RM125 annual fee if it is not waived as well as the service tax! It means getting you to spend more and incurring lots of debts for someone who wants to enjoy using the reward points to pay for the annual fee and the service tax? Which defeats the whole purpose of the service tax, right?

Have surrendered two cards and keeping my charge and three other cards, one of which is in the safe for autobills. The cards were offered free anyway and no fee waiver so it's manageable. Besides, since I settle all my bills before the 3rd or 5th each month, they is more than enough points to pay for the service taxes.

The cardholders' request is for the banks to absorb the service tax, after all, especially those who have been good customers and spend so much and not owe them a sen. Talk about appreciating loyalty. When the loyal customer is a good customer he is often ignored and forgotten. Only when you forget or  pay one sen less, they will come after you, sending debt collectors and legal letters threatening your life with more debts!

Looking at the generous rebates to entice customers to spend, it seems the banks are already paying for the customers as each rebate the cardholders receives, the card issuer actually pay out to the merchants! Which means they are paying the service tax for the customers on top of also giving reward points. So it's like a double rebate! So that makes sense and if the cardholders don't save the rebate to offset the service tax, they are only to be blamed.

If that's what the rebate is meant to help in the service tax, besides encouraging cardholders to spend, spend, spend, then the card issuer and banks can say they are actually paying for the customer. But they can't because it will defeat what do they call it, the 'spirit of imposing the service tax by 1Malaysia!'

And the 'spirit' we are told is to reduce credit card debts by reducing the number of cards held by an individual. But we all know the real reason is to tax innocent and good cardmembers to make up for the shortage in revenue collection.

If one is a spendthrift, even if he holds one card, he will still spend. Those who need more 'overdrafts' will hold more than one and what is paying the service tax if they can get money upfront for whatever they need? It's like gamblers, you can't kick the habit by closing down the lotteries and gaming shops. They will just find other outlets to gamble!

If everyone keeps one card, 1Malaysia isn't going to get his over half a billion ringgit and very much less if the whole card population is reduced to one or two cards per person. It doesn't even reduce the current huge credit card outstanding debt owed by those who hold multiple or even a single card. They will take the same amount of time to settle it with one or five cards as the amount only gets accumulated into one card!

Instead of only imposing the tax on the bank that the cardholder has taken the card, 1Malaysia has decided on individual cards. It will mean the demise of many co-brand cards and perhaps the Islamic credit cards because the cardholder will only hold one card that offers the best value for money. This may be good in the long run so that the card issuer will give a fair better deal on benefits and privileges to every cardholder than offer it to those who hold this or that card!

Will we see more benefits and higher value attached to one card now? Card issuers are really terribly slow in showing innovation. Instead of offering 10 cards, one for petrol, one for shopping, one for travel, one for electronic benefits and so on, why can't they offer such privileges attached to one card! Offer it like a seasonal benefit, one period for household, one for travel, one for eateries, etc. That way you need one card to enjoy the different seasons of privileges and sale. That way you do away with so many co-brand cards!

1Malaysia is really targetting the wrong people to make up for the extravagance the government is indulging in and the increasing debt they incur with their grandiose programmes as well as 'leakages'. They are actually worse than the recalcitrant credit card fello. They spend beyond their means and get away with it by taxing others!

If they imposed this service card to curb excessive and debts among credit cardholders, shouldn't BolehLand fellos also impose a tax on them for being bad spenders and creating huge debts that our future generation will suffer more? Since we can't impose a tax on them, perhaps remove them in the coming GE then! As they have taken away so much cheer in our lives, it's time they feel the sufferings as ordinary folks in the next GE!