More on Retail Banking Distress - Saudi Youth and Credit Cards

A rather short article from AlQabas relaying a recent survey among Saudi youth.

1. 52% are suffering from debt caused by the improper use of credit cards.
2. Two thirds expressed concerns about the rising cost of living, the housing shortage, decline in salaries, and the increase in unemployment.

Credit cards are a particularly insidious form of debt.  The interest charges are relatively high. As a result it's quite easy to get into a debt trap - where the debt keeps increasing even if one makes the minimum monthly payment.

Banks are not always responsible in the underwriting stage - cards are often given to those who shouldn't have them.  Where there is no central credit bureau, the bank is essentially lending "blind" as it doesn't know the customer's credit history (payments) nor does it know how much credit outstanding the customer has.  

And credit monitoring and management is absolutely woeful.  I know a customer of one regional financial institution - the winner of more than one award for excellence in banking who restructured a client's credit card debt to a five year personal loan. One month after the negotiations concluded the chap got a letter from the credit card division of that same bank thanking him for "paying off" his balance and offering him a new credit card with a higher limit!  This after they had spent the previous six months writing him letters threatening legal action and all sort of woeful consequences if he didn't pay his bill.   Somehow when his balance was transferred from the credit card division to the personal loan division it registered as a "payoff".