1 How High Interest Card Debts Affects Debtors’ Quality of Life Survey Report Dr. Robert Ting-Yiu...

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How High Interest Card Debts Affects Debtors’ Quality of Life Survey Report

Dr. Robert Ting-Yiu Chung Director of The Public Opinion Programme,

University of Hong Kong

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Survey OverviewSurvey Objective

To investigate the impact of debts from high interest rate credit cards on debtors’ quality of life to help plan the public education on proper financial management

Survey Period

May 26, 2008 to June 2, 2008

Methodology

Telephone survey with interviewers

Survey Target

Hong Kong citizens aged 18 or above who were credit card users and had revolved their credit last year

Survey Institute

The Public Opinion Programme, University of Hong Kong

Sampling Method

The 6,000 contacts were randomly drawn from the database of the commissioning organization and the numbers were mixed in random order to produce the final sampling frame by the research institute.

Sample Size

501 successful cases

Response Rate

61.9 % (Calculation based on the number of qualified targets)

Standard Sampling Error

Less than 2.2 %, the sampling error for all percentages was less than plus/minus 4.5 percentage points at 95%confidence level.

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Respondents' Profile

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Gender

Successful cases ： 501

Female44% Male

56%

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Age


15%

2%

19%

32%

1%

32%

0%

10%

20%

30%

40%

18 - 24 25 - 30 31 - 35 36 - 40 41 - 45 46 orabove

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Educational Level

Primary or below

3%

Secondary 65%

Post-secondary or above

32%


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Occupation

Working class–Full-time Work

97%

Working class–Part-time Work

1%

Non-working class – unemployed

<1%

Non-working class – Student

<1%

Non-working class – Retired

<1%

Non-working class – Housewife

2%

Total 100.0%Successful cases ： 497

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Monthly Personal Income

1%

16%

2%

19%

54%

5% 2%

0%

10%

20%

30%

40%

50%

60%

$5,000 orbelow

$5,001 -$10,000

$10,001 -$20,000

$20,001 -$30,000

$30,001 -$40,000

$40,001 -$50,000

$50,001 orabove


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Survey Findings

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1. Credit Card Usage Behavior

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Respondents owned 3.5 credit cards on average at a time

2% owned 10 credit cards or above

59%

34%

2%5%

0%

10%

20%

30%

40%

50%

60%

70%

1 - 3 cards 4 - 6 cards 7 - 9 cards 10 cards or above

Q ： How many credit cards have you owned at your prime?


Avg ： 3.5 cards

Error ： 0.09 cards

Base ： 499

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Respondents on average spent HK$7,164 on credit card at that time

10% spent over HK$20,000 per month

34%

29%

1%

8%

13%

4%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

$3,000 orbelow

$3,001 -$6,000

$6,001 -$10,000

$10,001 -$15,000

$15,001 -$20,000

$20,001 orabove

Don'tknow/Hard

to say

Q ： What was your average monthly credit card spending (including both payment and advanced cash withdrawal) then ?


Avg ： $7,164 Error ： $252 Base ： 493

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2. Challenges in Clearing All Card Debts

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Almost half of respondents opted for partial repayment of card debts

Don'tKnow/Hard to

say3%

Makepartial

payment

Make fullpayment

48%

49%

Q ： In general, will you repay all credit card debts?

Successful cases ：501

Don’t know/ Hard to say, 3%

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For those making partial payment,30% opted for settling minimum payment

Q ： If not, what percentage of the debts will you settle in general?

4%

29%

7%

2%

20%

24%

14%

0% 5% 10% 15% 20% 25% 30% 35%

Repay most of them (i.e. 91-99%)

Repay some (81-90%)

Repay some (61-80%)

Repay some (41-60%)

Repay some (21-40%)

Repay some (6-20%)

Min payment(i.e. 5%)


Avg ： 29.8% Error ： 1.73% Base ： 245

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The triggers for revolving credit: gripping cash; cash flow only sufficient to

cover minimum payment

18%

2%

5%

19%

54%

51%

0% 10% 20% 30% 40% 50% 60%

Others

Feel more advantageous paying at a latertime

Want to spend money on investment, travel,study...etc

Card debt are not too heavy

Cash flow only sufficient to cover minimumpayment or partial payment

Want to keep more cash in hand

Q ： Why didn’t you repay all card debts?

Successful cases ： 244 (Multiple answers)

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37% considered making full repayment of card debts difficult

10%

27%

21%21% 21%

1%

0%

5%

10%

15%

20%

25%

30%

Very difficult Quite difficult Average Not reallydifficult

No difficulties Don'tknow/Hard

to say

Q ： How difficult do you think repaying all card debts is?

37%


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Difficulties in making full payment:63% blamed the high interest rate of credit card 59% overspent on credit cards without noticing it

22%

1%

3%

39%

63%

59%

0% 10% 20% 30% 40% 50% 60% 70%

Don't know/ Hard to say

Others

Pay off card debt with other credit cards, yet end upwith hefty debts

Do not know the exact amount of debt as all cardshave debts

Over-spending on credit cards without noticing it

Interest rate of credit cards is too high

Q ： Why it’s so difficult to repay all card debts?

Successful cases ： 184 （ Multiple answers ）

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47% would borrow from banks or financial institutes;48% would pay all he/she had; 41% would wait for double

salary pay or year-end bonus

7%

47%

48%

1%

1%

9%

41%

11%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Don't know/Hard to say

Others

Pay off credit card debt with other credit cards

Borrow from family members and friends

Work for more part time jobs

Wait for double salary pay or year-end bonus

Borrowfrom banks or financial institutes

Repay all I have

Q ： Whom will you turn to for help if you cannot repay all card debts?


Among those who are unable to make full repayment:

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3. The impact of high interest card debts on respondents’ quality of life

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Over 80% thought debts from high interest rate credit cards affected their financial status

Near 50% felt they would be controlled by card debts, more careful in spending, would not have enough money to spend

and would have no savings

48%

48%

48%

4%

13%

48%

0% 10% 20% 30% 40% 50% 60%

No impact at all

Others

No future as no savings can be made

Not enough money to spend

Less freedom due to the need of morecautious spending

Feel being controlled by card debt

Q ： Which of the following do you think would happen if you cannot repay all card debts?


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75% considered debts from high interest rate credit card affected their psychological aspect

30-40% thought they would feel stressful, afraid that their family members and friends would

know about their situation

17%

33%

39%

25%

6%

21%

29%

23%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

No impact at all

None of the above

Sleep poorly

Being emotional

Afraid of receiving monthly card statement

Self-hatred from over-spending

Afraid family members may notice about their situation

Feeling stressful


Q ： Do you think the following would happen if you cannot repay all card debts?

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Over 90% respondents thought high interest rate credit card debts affect their daily spending behavior mainly because they

would have Reduce shopping and spending on meeting with friends

18%

7%

2%

40%

76%

51%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

No impact at all

None of the above

Reduce allowance forfamily

Reduce spending on meals

Reduce spending onmeeting friends

Reduce shopping



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50% respondents thought high interest card debts affect their work:

About 20% afraid of receiving payment reminder calls and had problem in concentrating on their work

48%

22%

2%

11%

15%

19%

17%

0% 10% 20% 30% 40% 50% 60%

N/A (non-working people)

None of the above

No impact at all

Affect work efficiency

Afraid boss or colleagues may notice about theirproblem

Difficult to concentrate on their work

Afraid of receiving payment reminder calls



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4. Knowledge on Balance Transfer Plans

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Almost 90% respondents have heard of balance transfer plans

No11%

Yes89%

Q ： Have you ever heard of balance transfer plans?


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Benefits of balance transfer plans to respondents who have heard of it:Fixed monthly repayment amount, a good grasp of the situation

facilitated by consolidated accounts and controllable repayment schedule

1%

73%

76%

71%

2%

2%

59%

67%

62%

0% 10% 20% 30% 40% 50% 60% 70% 80%


No benefit at all

Others

Lower monthly repayment amount

Shorter repayment period

Lower interest rate for earlier repayment of capital &

interest

Prov ide a clear picture of repayment schedule

Consolidation of a ll accounts so that debtors can have

a good grasp of their situation

Fixed monthly payment amount

Q ： What are the benefits of balance transfer plans?


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Wish list for ideal balance transfer plans to those who have heard about that:

Maintain quality of life; flexibility to make adjustment after the plan is proposed; personalized services from specialists for

customized financial management

2%

57%

63%

51%

5%

3%

0% 10% 20% 30% 40% 50% 60% 70%


None of the above

Others

Specialists are available to prov ide

analysis & personalized serv ices

Have the flexibility of making

adjustment after the plan is proposed

Quality of life will be kept intact

Q ： What other advantages do you think balance transfer plans have apart from the mentioned items?


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93% of those who have heard of balance transfer plans

agreed balance transfer plans help shorten repayment period

Don't know / Hard to say

1%No5%

Yes93%

Q ： Do you think balance transfer plans are effective solutions for clearing card debts earlier?


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Conclusion

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High interest card rates make full payment difficult

Survey reveals that nearly half of the respondents chose to make partial repayment and among them, over 50% explained:

Some wanted to have more cash in hand and some said they only have enough cash flow for minimum payment or partial repayment

37% considered making full payment difficult: Reasons ： Interest rate of credit cards was too high; some have overspent by their credit cards without noticing it.

Respondents who would not settle all the payment would usually repay all they had at that time, borrow from banks or financial institutes or wait for double pay or year-end bonus.

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Impact of high interest card debts on debtors’ quality of life

Impacts on financial status (87%) :Feel card debts take control over lifeMore careful in spendingNot enough money to spendNo savings

Impacts on daily consumption behavior (93%) :Reduce shopping and spending on meeting with friends

Impacts on emotional aspect (75%) :Feeling stressfulAfraid their families would find out their problemHating themselves for overspending

Impacts on work (50%) :Afraid of receiving payment reminder calls during working hoursHad problems in concentrating on their work

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Balance transfer plans help shorten repayment period

A majority of respondents had heard of balance transfer plans and those who have heard of it thought its benefits included: 1) fixed monthly payment terms, 2) clear list of financial standing and 3) have a good grasp of repayment schedule. They considered balance transfer plans could help settle card debts earlier.For those who have heard of balance transfer plans, their wish list of balance transfer plans included:

Quality of life being kept after adopting balance transfer planFlexibility in changing payment plans after adoptionConsultancy services arranged for customized financial management

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