Sunday, June 6, 2010

Cheques in the letterbox! - Can we trust the banks to do what is right for its clients? Credit Loan Crisis in the making in Singapore?

Cheques in the letterbox! How low can the banks go? 
Not that anybody should be unhappy if we receive cheques in the letterbox. Keep them coming by all means! 
However, a reader emailed a copy of it to me and I was disgusted by what I saw and it set me thinking: Can we trust the banks to do what is right for its clients? And is a Credit Loan Crisis in the making in Singapore? 
A reader’s father received what seemed like a perfectly normal cheque, written in his name with the amount stated. Pleased that he is receiving money from the bank, he happily went to his child (my reader) to get help in depositing the cheque into his account. My reader was appalled when he saw the letter and cheque.


And the following is the reason why:


Cheque in the Letterbox from the Bank


Touted as extra cash at a special rate of 1.88% for six months with no processing fees! Doesn’t it sound like a bargain already? 
Recipients are encouraged to “take advantage of this promotion now” to “REWARD” yourself with a well-deserved holiday or “INDULGE” in something that you’ve always wanted. 
A bank asking you to borrow money for a holiday and pandering to your wants! 


Wondering what is the interest rate after six months? You have got to read through the fine print at the back to know that it is 24% per annum!
So for someone who does not understand English as in the case of my reader’s father, are there safeguards in place?


This is not to pinpoint any bank in particular. Most (if not all) banks have marketing campaigns for their credit and loan facilities. The tricky part is in finding a balance and drawing the line. 
It is a reminder that banks are not longer the service provider of just depositing and withdrawing money that we were all so used to. 
Mini-bonds and Lehman Brothers, anyone? 
As listed companies, they have profit motives and have to answer to shareholders as well. That is how the Credit Crisis happened. (Click here to watch the simple to understand video of Credit Crisis Visualized


Which is why, getting ourselves Financially Educated is of great importance. So we can all come to our own decisions and not have products or credit pushed to us.


More importantly, I hope it is not the beginning of us being led down the slippery slope of living on credit. I remember watching on TV about the situation in US where someone who was on the verge of bankruptcy (or already one) who continued to receive pre-approved credit card in her letterbox!


Again, it is really simple. Back to basics of Personal Finance 101 – differentiating Needs from Wants and NEVER borrow a single cent for Wants!


So next time a mail comes into your letterbox, read carefully and think twice - thrice - before taking any loan or credit!


Wealth Matters! If money isn’t coming into your pocket, money is going into someone else’s.


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